SINGAPORE, May 9 (Reuters) - Oversea-Chinese Banking Corp (OCBC), Singapore's second largest bank, maintained 2025 guidance and set aside credit allowances, citing a challenging economic outlook after posting on Friday a 5% drop in first-quarter net profit that beat expectations.

"Looking ahead, the heightened uncertainties brought about by the shifts in trade policies and geopolitical risks are expected to have a dampening effect on overall economic growth in the region," OCBC's Group Chief Executive Helen Wong said in a statement.

"We have prudently set aside credit allowances to buffer our portfolio on a forward-looking basis, in view of the challenging economic outlook," she added.

OCBC 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, according to Wong's presentation slides accompanying the earnings results.

OCBC's results rounded up a solid first-quarter earnings season by Singapore banks with OCBC and DBS Group beating forecasts and United Overseas Bank posting stable but weaker-than-expected results.

All three flagged uncertainties triggered by the impact of U.S. President Donald Trump's tariffs, following major global lenders such as HSBC and Standard Chartered which have highlighted the threat to economic growth.

OCBC, which is also Southeast Asia's second-largest lender, said January-March net profit fell to S$1.88 billion ($1.45 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.

OCBC, which counts Singapore, greater China and Malaysia among its key markets, posted a 25% jump in total allowances in the first quarter to S$212 million.

The lender attributed it mainly to allowances for non-impaired assets of S$118 million arising from changes in credit risk profiles and management overlays set aside for heightened uncertainties in the macroeconomic environment.

Return on equity fell to 13% in the first quarter from 14.7% in the same period of 2024.

Net interest margin, a key profitability gauge, dropped to 2.04% during the quarter from 2.27% a year earlier.

($1 = 1.3002 Singapore dollars)