By Yantoultra Ngui
SINGAPORE (Reuters) -Singapore’s second- and third-biggest banks, among Southeast Asia’s largest by assets, forecast on Friday an improving loan growth environment in 2025, after posting strong sets of third-quarter net profits that beat market expectations.
The forecasts followed the U.S. central bank’s interest rate cut by a quarter percentage point on Thursday, the second straight reduction after a bigger half point cut in September.
“I do see that next year loan growth has a bigger potential compared to this year,” Oversea-Chinese Banking Corp or OCBC, Group CEO Helen Wong told an earnings briefing.
Smaller peer United Overseas Bank, or UOB, projected high single-digit loan growth for 2025, versus low single-digit it is seeing for 2024, as it reported a faster-than-expected rise in third-quarter net profit.
Nevertheless, U.S. President-elect Donald Trump’s proposed policies that include more import tariffs and stricter immigration restrictions could spur inflation and translate into fewer interest rate cuts by the Federal Reserve.
OCBC’s Wong said uncertain geopolitical conditions could potentially create market volatilities.
OCBC, Singapore’s second-biggest bank after DBS Group, said July-September net profit increased 9% to S$1.97 billion ($1.49 billion) from S$1.81 billion a year earlier. That beat the mean estimate of nearly S$1.91 billion from analysts surveyed by LSEG.
The bank also said it was firmly placed to achieve its 2024 targets, including full-year net interest margin, a key profitability gauge, at around the 2.20% level.
OCBC’s results rounded off a strong third-quarter earnings season by Singapore banks, which have benefited in recent years from higher global interest rates and strong inflows of wealth drawn by the city-state’s political stability.
Both local peers DBS and UOB posted record quarterly earnings on the back of higher fee income and increased markets trading income.
OCBC’s improved performance was also driven by increased wealth management activity that lifted fee and trading income, in addition to higher insurance income and lower allowances.
Net interest margin was, however, lower at 2.18% during the quarter from 2.27% a year earlier, a trend similar with DBS and UOB too.
OCBC’s return on equity rose slightly to 14.1% in the third quarter from 14.0% in the same period of 2023.
($1 = 1.3201 Singapore dollars)
(Reporting by Yantoultra Ngui; Editing by Jamie Freed, Christopher Cushing and Muralikumar Anantharaman)
