By Yantoultra Ngui
SINGAPORE (Reuters) -Singaporean banks beefed up their buffers against potential loan losses that could emerge due to uncertainties triggered by U.S. President Donald Trump’s tariffs despite strong balance sheets, while delivering a solid first-quarter earnings season.
Oversea-Chinese Banking Corp (OCBC), Singapore’s second-largest bank, on Friday said it adopted a prudent approach to set aside allowances for non-impaired assets of S$118 million ($90.85 million), citing a challenging economic outlook after posting first-quarter net profit that beat expectations.
“We have to be comfortable at a level based on how we test our book that we think this is the right amount that we are taking,” OCBC Group Chief Executive Helen Wong said in an earnings briefing on Friday.
“Another impact is what we call the macroeconomic factors that may actually impact how we make our provision,” she added.
Larger rival DBS Group on Thursday said it took general allowances of S$205 million as a prudent measure to strengthen its general provision reserves, while delivering better-than-expected first quarter results.
Smaller peer United Overseas Bank on Wednesday said it had set aside an additional pre-emptive allowance to strengthen provision coverage after reporting a stable but weaker-than-expected first-quarter profit. It also paused giving 2025 guidance.
Major global lenders such as HSBC and Standard Chartered have also highlighted the threat to economic growth due to the impact of Trump’s tariffs.
Despite the uncertainties, OCBC, which is also Southeast Asia’s second-largest bank, maintained all of its 2025 financial targets, including net interest margin in the region of 2% and credit costs in the range of 20 to 25 basis points.
Shares of OCBC rose marginally Friday afternoon, underperforming the domestic benchmark index’s nearly 0.7% rise.
In a research note released after the earnings results, Jefferies’ analysts said OCBC’s net interest margin decline was larger than peers, leaving not as much room versus the 2025 guidance.
Net interest margin, a key profitability gauge, dropped to 2.04% during the quarter from 2.27% a year earlier.
OCBC, which counts Singapore, greater China and Malaysia among its key markets, said January-March net profit fell to S$1.88 billion from a record S$1.98 billion a year earlier, mainly on lower net interest income. It was OCBC’s first on-year quarterly net profit drop since the first quarter of 2022.
But the result beat the mean estimate of S$1.87 billion from two analysts polled by LSEG.
Return on equity fell to 13% in the first quarter from 14.7% in the same period of 2024.
($1 = 1.3002 Singapore dollars)
(Reporting by Yantoultra Ngui; Editing by Leslie Adler and Stephen Coates)
