Tough Q3 awaits banks as reporting season rolls in

Higher interest rates won’t counter escalating headwinds.

Singapore’s largest lenders will likely report more bad loans when they unveil third quarter results later this month.

According to Barclays, the third quarter will be tougher for Singapore banks as lower loan growth, moderated market-related fee income and potentially higher credit costs continue to act as headwinds for the sector.

Higher interest rates are unlikely to offset the effect of these headwinds.

“We expect to see some asset quality deterioration in its ASEAN loan book while DBS previously pointed to mild deterioration in Hong Kong and Singapore SMEs. DBS (OW) remains our preferred name among the Singapore banks as it has a dominant deposit franchise in Singapore and is most leveraged to rising rates,” said Barclays.