Singapore banks’ interest income expected to come weaker in Q2

Net interest margins of the 3 banks are expected to compress by 5-7 basis points.

Banks in Singapore are expected to report weaker net interest income (NIII) in Q2 2025 compared to the previous quarter on the back of lower interest rate and softening loan growth.

NII is estimated to decline 1.1%-1.9% across DBS, OCBC, and UOB, according to CGS International in a 15 July report.

“We expect NIMs across the 3 banks to compress by a wider 5-7 basis points (bp) in Q2 2025F compared to the 2-3bp compression in Q1 2025 with the exception of OCBC,” the investment house said.

Latest banking industry statistics by the Monetary Authority of Singapore (MAS) showed two consecutive months of declining loans, suggesting NII should decline in Q2, it added.

Credit costs in Q2 may also trend higher than their FY2025 guidance following weakness across ASEAN economies such as Thailand and Indonesia, CGS International said.

“However, we do not expect total credit costs to change drastically [quarter-on-quarter], as we believe the pre-emptive GPs recognised by the Singapore banks in Q1 2025 should remain sufficient amidst the current credit cycle,” it said.