With second-quarter results out for the three home-grown Singaporean banks, two things have become apparent: they are doing very well for the moment but all expect business to slow gradually.

DBS, UOB and OCBC all posted double-digit growth of net income in the second quarter compared with the same period a year ago – with S$1.37 billion, S$1.08 billion and S$1.21 billion respectively. They were helped by strong growth in the loans business and an expansion in net interest margins. Loan growth was 10 to 12 percent.

Cautious Tones Going Forward

Singapore bank chiefs however are concerned about business easing in coming quarters due to trade tensions between the U.S. and China, as well as a softer loan outlook due to property cooling measures on home grounds.

DBS Chief Executive Piyush Gupta expressed his expectation that the spillover effects from U.S.-China trade tensions would be unlikely to remain benign in the second half of the year, while OCBC Chief Executive Samuel Tsien said that the operating environment was increasingly challenging. UOB highlighted the impact of the Singapore government's recent property-cooling measures. 

Guidance Tweaked

For 2018, DBS's chief expects income growth at a low double-digit rate, with a reduced loan growth guidance of 6 to 7 percent range, down from 8 percent previously. The bank's full year net interest margin is expected to rise 1 to 2 basis points, above previous guidance of 1.85 percent.

UOB's chief executive Wee Ee Cheong said the bank «continues to target high single-digit loan growth for the full year», after enjoying 10 percent loan growth in second quarter.

OCBC's Chief Operating Officer Ching Wei Hong expects softer sales due to recent property cooling measures, according to a report in the «Business Times» (behind paywall). Still, the bank expects overall home-loan growth in the low to mid single-digit percentage range this year.

Digital Banking

All three banks are spending more on digitization initiatives. OCBC's chief said during Monday's results briefing that he plans a digital bank in Indonesia, joining peers who are already building out systems to serve mobile-savvy customers in the region. However, the digital bank will not be a standalone unit, mirroring a model used by DBS, according to a «Straits Times» report (behind paywall).

Two years ago, DBS launched digibank India, India's first mobile-only bank. This was followed by the launch of digibank in Indonesia last August, according to the bank's press release.

Last week, UOB announced a digital bank for five markets in southeast Asia, serving a growing tech generation, equipped with artificial intelligence tools that help the bank learn their customers needs.

Share Price Reactions

Shares of all three financial institutes rose on Monday. DBS shares added 1 percent to S$26.40. UOB, which announced its second-quarter profits on Friday, saw its share price surge by 2 percent to S$27.13 on Monday. OCBC, which reported a record quarter on Monday morning, saw its share price jump by 2 percent in the afternoon, touching S$11.58.