Singapore banks to see NIM compression and management fee surge in Q3: UOBKayHian

Uncertainties cause the trends, the brokerage firm said.

Singaporean banks DBS and Oversea-Chinese Banking Corporation (OCBC) could experience under NIM compression and see a surge in management fees and benign asset quality in the third quarter of the year, UOBKayHian (UOBKH) predicted.  

These trends are caused by heightened uncertainties brought by the trade conflict and the US government shutdown, UOKBH said in its 3Q2025 report.  

It also expected a net profit decline for DBS and flat quarter-on-quarter (QoQ) results for OCBC.

For DBS, UOBKH said: “We estimate a muted loan growth of 2.4% YoY (year-on-year) and 0.5% QoQ in 3Q25. We expect NIM to compress 18bp YoY and 12bp QoQ to 1.93% in 3Q25, below the previous exit NIM of 1.95% in July 2025.” 

DBS’ fees grew at 9% YoY. “We expect contribution from wealth management to increase 15% YoY and 8% QoQ to $700m in 3Q25,” it said.

Market sentiment was boosted by the easing of trade tension and anticipation of Fed rate cuts, UOBKH noted.

Asset quality is expected to stabilise with the NPL at 1.0%. DBS has accumulated ample management overlay for general provisions of $2.6b.

For OCBC, its NIM compression will be moderate. “Loans are expected to grow by a healthy 6.8% YoY but remain muted at 0.5% QoQ in 3Q25. We expect NIM to ease by a slower 7bp QoQ to 1.85% in 3Q25, below the previous exit NIM of 1.88% in Jun 25, due to its efforts to lower cost of deposits.”

As for wealth management contributions to OCBC, UOBKH forecasted contributions will grow steadily by 20% YoY to $295m. “Loans and trade-related fees could be flat YoY at $130m, it said.

Asset quality is seen to stay benign in 3Q25. “We expect the NPL ratio to be stable at 0.9%. We have factored in total provisions of S$204m and credit costs of 25bp in 3Q25, which is at the top-end management’s guidance of 20-25bp for 2025.”