Singapore banks are bracing for a challenging second quarter (Q2) of 2025 as net interest margin (NIM) compression is expected to accelerate, according to a recent report. The report highlights that whilst the Singapore Dollar is likely to remain weak in the short term, the Hong Kong Dollar’s pressure may have eased. This financial landscape is impacting market sentiment, although wealth management continues to provide a medium-term tailwind for the sector.
The report further notes that United Overseas Bank (UOB) is anticipated to continue bolstering its general provisions buffer. However, writebacks across banks are unlikely to occur in the near future. This cautious approach reflects the ongoing uncertainties in the financial markets.
In terms of financial performance, the report predicts a decline in both revenues and net profits for Singapore banks on a quarter-on-quarter basis in Q2 2025. Despite these challenges, the focus remains on banks with higher and growing yields, which are expected to perform better amidst the NIM squeeze.
The report underscores the importance of strategic positioning for banks during this period of financial tightening. As the industry navigates these challenges, the emphasis on wealth management and prudent financial strategies will be crucial for maintaining stability and growth.
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