Singapore banks’ wealth fees may ease in Q3 as AI lending, bond yields draw scrutiny
Analysts expect interest margins to stay under pressure, but asset quality and capital positions to hold firm
Singapore's three local banks may see a slowdown in wealth fees during the third quarter, despite strong performance in the second quarter, according to analysts. UOB is expected to see an 8% quarter-on-quarter increase in net fee income, while DBS and OCBC could see declines of 6% and 16% respectively, according to Jefferies' Joanna Cheah.
The banks' exposure to artificial intelligence-related financing and rising bond yields are under closer scrutiny. DBS, OCBC, and UOB have originated AI-related financing totaling S$25 billion this year, with DBS keeping a fraction of that on its balance sheet. Rising bond yields could impact the banks' trading income, potentially affecting their capital positions.
Despite this, analysts believe the pressure on book value should be manageable, as organic capital generation through healthy earnings can offset it.
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