Analysts warn of slower growth for Singapore banks in 2027 despite higher rates

Singapore's three major banks reported mixed third-quarter 2026 earnings, with DBS and UOB missing analysts' expectations while OCBC posted a modest profit rise. Analysts said the sector may face a tougher environment in 2027 as higher interest rates initially squeeze margins.

"The boom years did a lot of the work for Singapore’s banks," said Eric Xiao, head of sales in Asia for CMC Markets. He added that banks will need to generate growth themselves in 2027, noting that DBS recorded a record S$15 billion of net new money in the quarter but saw wealth-management fees fall 6 percent as client trading declined.

Ritesh Ganeriwal, group head of investment and advisory at Syfe, observed that the banks' core businesses remained solid in Q3 but that "interest rates are no longer doing the heavy lifting," with Singapore rates staying low while competition for deposits intensifies.

OCBC reported a 3 percent rise in net profit to S$2.04 billion, beating estimates. DBS posted a 5 percent year-on-year profit drop to S$2.81 billion, and UOB's profit surged 182 percent to S$1.25 billion after a low-base year, though it also fell short of forecasts.

Analysts noted that share prices of the banks have been pressured following earlier gains, attributing the recent sell-off to earnings disappointment and weaker macroeconomic sentiment. A digital-brokerage analyst warned that further earnings weakness, deteriorating credit conditions, or prolonged macro pressures could weigh on performance and share prices.

Looking ahead, Cheng Chye Hsern of Providend said DBS has the "steadiest outlook," citing management's view that net interest income has bottomed and total income is expected to grow in the mid-single-digit range next year. However, he pointed out that DBS trades at nearly three times book value, above its historical average.

Xiao highlighted that DBS missed expectations mainly due to a 65 percent plunge in markets trading income, while UOB faces thinner margins and rising costs into 2027.

Joanna Cheah, ASEAN research analyst at Jefferies, said earnings drivers are becoming more differentiated: UOB faces greater pressure from net interest margin compression, whereas DBS and OCBC saw margins begin to recover at the end of the quarter.

Analysts also said the broader Singapore market decline is not solely a bank story. Cheah linked recent weakness to global risk-off sentiment and domestic profit-taking after a strong rally, noting that the U.S. midterm elections heightened concerns over regulatory scrutiny of AI and data-centre investments, spilling over into Asian markets. She emphasized that Singapore's fundamentals remain defensive, supported by resilient earnings, a strong currency and healthy corporate balance sheets.