Two of the three largest Singaporean banks by assets reported higher net interest margins in the second quarter against a year earlier, as they charged more of their existing borrowers higher interest rates.
The NIM at DBS Group Holdings Ltd., Singapore's largest bank, improved to 1.91% as of June 30 from 1.84% a year earlier, according to data compiled by S&P Global Market Intelligence. Oversea-Chinese Banking Corp. Ltd.'s NIM rose to 1.79% from 1.67%, while United Overseas Bank Ltd.'s NIM fell to 1.80% from 1.83%.
The so-called loan repricing effect in the second quarter was more apparent against the first, with all three lenders posting higher NIM for the period.
On a year-over-year basis, net income at DBS Group, OCBC and UOB grew 20.2%, 1% and 8% in the second quarter, respectively, to S$1.60 billion, S$1.22 billion and S$1.17 billion. This came on the back of higher net interest income, with DBS Group's NII coming in at S$2.43 billion in the second quarter, against S$2.22 billion in the year-ago period. OCBC and UOB posted second-quarter NIIs of S$1.59 billion and S$1.65 billion, respectively, against S$1.45 billion and S$1.54 billion previously.
However, as the U.S. stopped raising interest rates for now and Singapore's economy continues slowing, there is likely added pressure on loan profitability in the second half of 2019.
DBS Group CEO Piyush Gupta said at the group's second-quarter earnings briefing that the profitability outlook for banks is clouded by macro uncertainties like trade tensions between the U.S. and China. He added too that NIM may have peaked on the back of expected interest rate cuts by the U.S Federal Reserve in the second half.
The Singapore economy grew 0.1% in the second quarter against the year-ago quarter, according to Aug. 13 data from the city state's Ministry of Trade and Industry. The authorities also slashed its full-year economic growth forecast to between no growth and 1% from a previous estimate of a growth of 1.5% to 2.5%, citing global trade tensions and a struggling manufacturing sector as main concerns.
As of Aug. 13, US$1 was equivalent to S$1.38.