Singapore's three largest banks—DBS Group Holdings, the holding company of DBS Bank; Oversea-Chinese Banking Corp. (OCBC); and United Overseas Bank (UOB)—reported slightly lower profitability in the first half of 2025 (H1 2025), compared with the same period a year ago. However, their balance sheets remained strong and well-positioned to weather tariff risks. Profitability moderated from peak levels Return on average assets decreased to 1.1% to 1.4% in H1 2025 from 1.1% to 1.5% in the year-earlier period due to net interest margin (NIM) compressions from sharply lower HKD and SGD benchmark rates, though subsequent deposit repricing will ease the downward pressure. Credit costs increased mainly because of preemptive provisioning, and income taxes rose marginally with Singapore's new 15% global minimum corporate tax rate. However, non-interest income grew strongly, led by trading income and wealth-related fees. Loan growth on a constant currency basis accelerated to 4% to 9% year over year from 3% previously, led by corporate loans and Singapore housing loans, but the ongoing tariff uncertainty could weigh down on growth prospects in the second half of 2025. Asset quality remained stable As of 30 June 2025, nonperforming loan (NPL) and nonperforming asset (NPA) coverage ratios were broadly unchanged at 0.9% to 1.6% and 88% to 156%, respectively, year over year. Banks estimate the impact of US tariffs on their loan portfolios to be limited, though second-order effects are hard to assess due to the evolving US trade policy. The risk from their commercial real estate exposure in Greater China will be mitigated by their focus on top-tier private developers and state-owned enterprises. Capital ratios stayed high As of 30 June 2025, common equity tier 1 (CET1) ratios were 15.3% to 17.0% on a transitional basis and 15.1% to 15.3% on a fully loaded basis. However, fully loaded capital ratios will decrease gradually over the next two to three years as excess capital is returned to shareholders via special dividends and share buybacks, per plans announced in February 2025. Liquidity remained strong For the second quarter of 2025, liquidity coverage ratios (LCRs) and net stable funding ratio (NSFRs) were well above regulatory requirements at 136% to 147% and 113% to 118%, respectively. As of 30 June 2025, the banks remainedprimarily funded by customer deposits, which constituted 70% to 83% of their totalliabilities. Current account and savings deposit ratios rose to 50% to 57% from 48% to 52% a year earlier, while loan-to-deposit ratios declined to 77% to 85% from 78% to 84% over the same period, supported by strong inflows from high-net-worth customers. Moody's report redisseminated by The Asian Banker
