[SINGAPORE] Shares of Singapore’s three local banks continued to slide on Monday (Apr 7), weighed down by a broader market sell-off triggered by concerns over US tariffs.
As at 12.50 pm, dropped 9.9 per cent to S$39.02, declined 7.6 per cent to S$15.35, and slid 6.1 per cent to S$33.29.
The benchmark Straits Times Index – which is heavily weighted by the three banks – fell 8.1 per cent to 3,515.09, just days after it breached the 4,000-point milestone on Mar 28.
This comes amid a broader sell-off in local banking shares. Since Mar 28, Singapore’s three local lenders have collectively shed S$37.3 billion in market value, according to calculations by The Business Times.
While the banks are not directly affected by US President Donald Trump’s sweeping reciprocal tariffs, analysts said potential rate cuts by the US Federal Reserve – in response to slower growth caused by the tariffs – could weigh on bank earnings.
“Slower growth expectations are a key headwind for the (banking) sector as this may impact new credit formation and risk taking by customers,” wrote Maybank analyst Thilan Wickramasinghe in a research note on Friday.
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“While still unclear, potential Fed rate cuts could compress net interest margins (NIM) faster than anticipated, pressuring net interest income (NII),” he added.
DBS Group Research also noted in a Thursday note that expected US interest rate cuts would put pressure on the banks’ NIMs.
It added that UOB would be the “most affected” by Asean tariffs.
For the 12 months ended Dec 31, 2024, UOB derived S$6.2 billion of its S$14.3 billion in total operating income from outside Singapore – accounting for 43.6 per cent, the highest proportion among the three local banks.
The reciprocal tariff rates imposed by the Trump administration on Apr 3 include 46 per cent on Vietnam, 36 per cent on Thailand, 32 per cent on Indonesia, and 10 per cent on Singapore – the lowest among Asean countries.
China was hit with a 34 per cent tariff, while India faced a 26 per cent rate.
Not all doom and gloom
However, the Singapore banks’ robust liquidity profiles and diversified funding mixes will shield them from market volatility amid global trade risks and growth concerns, said Rena Kwok, senior credit analyst at Bloomberg Intelligence.
“Strategic-deposit repricing and targeted customer-acquisition strategies to obtain high-quality, low-cost deposits will help bolster Singapore banks’ interest margins during expected rate cuts in 2025,” she added.
Maybank’s Wickramasinghe expects that lower interest rates could support fee income growth, particularly in wealth management, helping to offset declines in NII.
And while South-east Asia will be affected by US tariffs, the region stands to benefit from supply chains shifting away from China due to “widening” tariff differentials.
He added: “The Singapore banks with their integrated regional businesses should be key beneficiaries from this trend.
“At the same time, China may respond with increased domestic stimulus to offset tariffs impact. This may provide opportunities for the banks given their North Asian exposure.”
