Meanwhile, problem loan ratios are expected to remain at 1% to 2%.

Singapore banks will keep a stable outlook, supported by its strong risk management and strategic diversification, according to Moody’s Investors Service.

The operating environment also remains stable, driven by steady economic growth in Singapore and major ASEAN countries, which offsets challenges in Hong Kong and China. 

“Key risks to our expectation stem from a sharper slowdown in Greater China, and increased tariffs and geopolitical tensions under the new US administration,” the research note said.

Moody’s also expects Singapore’s real GDP growth to normalise to around 2% to 3% in 2025 from 4.4% in 2024. Additionally, loan growth for major Singapore banks is projected to stay stable at around 5% in 2025.

Asset quality remains sound despite ongoing risks from commercial real estate exposures in Greater China. 

Problem loan ratios are expected to remain at 1% to 2% in 2025, supported by robust credit reserves and prudent risk management. 

Banks’ profitability is likely to remain stable, with return on average assets unchanged at 1.3%. However, the modest declines in net interest margins will be balanced by strong fee income growth, driven by wealth management activities. 

Meanwhile, the cost-to-income ratio is expected to remain stable at around 40% to 45%.

Capital levels are projected to moderate from peak levels due to increased distributions through special dividends and share buyback programs. 

The three largest Singapore banks—DBS, OCBC, and UOB—reported common equity tier 1 capital ratios ranging from 15.1% to 17.1% as of December 2024. 

These banks’ funding and liquidity are expected to stay robust, underpinned by concentrated domestic deposits and strong transactional banking franchises. 

Moody’s also expects continued strong government support for major Singapore banks due to their designation as domestic systemically important banks, which account for about 75% of local-currency deposits.