Singapore banks Q1 2025 earnings – Navigating geopolitical risks and softening margins

Singapore banks Q1 2025 earnings – What to expect

The three local banks are scheduled to release their Q1 2025 earnings in the coming weeks. Net income for DBS and OCBC is expected to decline year-on-year, marking their first drop since Q1 2022. This is likely to be driven by a slowdown in net interest income and higher loan loss provisions. Meanwhile, UOB’s net income is projected at 1.1% year-on-year (YoY)—its slowest pace of growth since Q2 2024.

Local banks’ share price performance

Over the past year, DBS has been the only one among the trio to outperform the Straits Times Index (STI), delivering a 23.4% return. In comparison, OCBC and UOB posted returns of 13.6% and 15.2%, respectively. However, on a year-to-date basis, all three local banks have underperformed the broader index, falling more than 3% into the red, compared to the STI’s modest 0.8% gain at the time of writing.

Softer net interest margin likely to weigh on interest income…

In Q1 2025, the US Federal Reserve (Fed) kept its interest rate unchanged at 4.25% - 4.5% in a likely response to US political uncertainty and a resilient growth and inflation backdrop. While the Fed’s pause may help moderate some downward pressure on Singapore lending rates, the effects of earlier rate cuts through 2024 may continue to seep into domestic interest rates. Since the start of the year, the three-month Singapore Overnight Rate Average (SORA) has declined from 3.02% to 2.55% as of end-March.

As a result, all three banks are expected to report softer net interest margins (NIMs) compared to the previous year, which may weigh on interest income generation. Meanwhile, cuts to flagship savings account rates at UOB and OCBC will only take effect after 1 May, implying that funding cost pressures could continue to compress margins in the near term.

…But improving loan demand may offer some cushion

That said, loan momentum has remained resilient in Q1 2025. Overall loan growth rose 5.3% year-on-year in January and 4.9% in February, supported by gains across both consumer and business segments. This likely reflects ongoing resilience in the domestic economy despite uncertainties surrounding US tariffs. Solid loan demand may help offset some of the pressure from narrowing NIMs, at least for now, although downside risks to financing needs are likely to persist over coming months, depending on the trajectory of US trade policy negotiations.

Continued momentum in fees and commissions income expected

For Q1 2025, the banks’ net fee and commission income is expected to maintain healthy growth momentum, with DBS (+7.7%), OCBC (+11.3%), and UOB (+10.5%) all posting solid gains for the segment. Heightened market volatility during the quarter may likely spur stronger demand for wealth management services, as investors sought advisory support and opportunities to buy into market dips. Volatile conditions may have also provided a boost to trading income for the banks. Resilient momentum in non-interest income may help to partially offset pressures from softer net interest income, supporting a more stable overall earnings backdrop.

Economic outlook in focus with Trump’s tariff shock

In the previous reporting quarter (Q4 2024), Singapore banks generally offered a cautious yet optimistic guidance, highlighting softer interest rates and geopolitical tensions as key risks but also confidence in the business to sustain earnings. In Q1 2025, a broad-based increase in loan loss provisions is widely anticipated, reflecting the banks’ prudence in preparing for heightened uncertainties stemming from Trump’s tariffs, which may directly pressure the banks’ earnings. Given the optimistic tone sustained over recent quarters, market participants will be watching closely for reassurances that the banks remain confident in their business resilience despite complicated trade dynamics and heightened global growth risks.

Fund flow data reveals sustained institutional net outflows for financials year-to-date

The Singapore Exchange (SGX) fund flow data indicates sustained institutional net outflows from the financial sector year-to-date, as concerns over Trump’s tariffs have prompted profit-taking following the banks’ strong performance through 2024. This trend suggests some caution toward the near-term outlook for financial stocks, with trade restrictions in the export-reliant Asian region heightening risks of an earnings slowdown and rising bad debts.

While there is some optimism that trade agreements could be formalised over coming weeks, the absence of any meaningful tariff rollbacks may still pose downside risks to global growth prospects, potentially driving further institutional outflows from the sector.

Valuation-wise, all three banks are currently trading above their five-year average price-to-book ratios, though this appears justified by stronger returns on equity (ROE) and higher dividend yields compared to previous years. Each bank is offering a dividend yield above 5%—among the highest in the region—positioning them as attractive options for both income and growth investors.

DBS share price: Technical analysis

The recent rebound in DBS' share price has filled the gap left by the early-April gap-down on tariff concerns. The stock is now encountering resistance around the S$43.00 level, while its daily relative strength index (RSI) has returned to its midline, resetting technical conditions to a more neutral stance from previous oversold levels.

A decisive break above the S$43.00 level could signal renewed buying momentum, which may put the S$44.75 level in focus next. That said, broader risks of forming lower highs persist. On the downside, the 200-day moving average (MA) remains a key support to watch; a breach below it could trigger fresh selling pressure, potentially pushing prices towards the S$39.70 level and reinforcing the broader downward bias.

OCBC share price: Technical analysis

Following the gap down in share price on 25 April, OCBC has so far struggled to break above its 25 April high at the S$16.16 level. A move above this level may be needed to open the way towards the S$16.52 level next. Defending its 200-day MA will be key. Meanwhile, its daily RSI is hovering near the midline, indicating more neutral momentum. With the share price consolidating over the past days, a breakdown below the S$15.76 range support could pave the way for a deeper pullback toward the broader upward trendline support around the S$15.40 level.

UOB share price: Technical analysis

UOB’s share price appears to be showing a similar structure to OCBC, with last week’s gap down bringing it slightly below its 200-day moving average. Reclaiming the MA-line may be crucial in the coming days. For now, its daily RSI has returned to the 50 level, suggesting a shift to more neutral momentum after previously oversold conditions. Failure to break back above the 200-day MA could see the share price drift lower toward the S$33.38 support level, followed by the broader trendline support around S$31.78 next in focus.