Banks in Singapore, from DBS to HSBC and Standard Chartered's Trust, are poised for healthy lending through 2H after total loans rose 10.5% year over year in May, beating estimates, according to Monetary Authority of Singapore data. The potential for new business opportunities as supply chains shift has been the primary driver, helping offset a likely moderation in consumer borrowing. Still, inflation could raise asset-quality risks.
Business Lending Picks Up, Despite Inflation
Singapore banks have the potential to attract business as companies shift their supply chains with the flat global 10% US tariff up for review in July, though inflationary pressure could cap growth. Business lending, which rose 10.8% in May y-o-y (vs. only 2.9% the same time last year), should continue to receive support from mounting demand for data-centre financing across Southeast Asia and the development of the Johor-Singapore Special Economic Zone. Trade activity, up 43.8% despite geopolitical and shipping risks, should remain supported by strong AI-related semiconductor demand, but might waver mid-year on tariff uncertainties.
Singapore's trade, transportation and storage output rose 6.7% in 1Q vs. 3.6% in 1Q25, according to the Ministry of Trade and Industry data.
Manufacturing Demand to Rise, But Asset Quality at Risk
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Demand for manufacturing loans, down 2% month-on-month, as supply chains move to Southeast Asia. Tariff-related impacts appear milder than expected for Singapore, with exports holding steady and domestic demand remaining strong. DBS, with greater exposure to manufacturing loans at 10.4% of its book, is well positioned to capture this demand. Yet, asset quality might merit greater scrutiny, after the system-wide nonperforming loan ratio deteriorated 22 bps to 3.18% in 1Q26 vs. 4Q25, as inflation and supply-chain disruption will weakens profitability and constrains repayment capacity.
Singapore's manufacturing output slowed to 5% in 1Q vs. 8.6% in 1Q25. Lending to the sector represents an average 8.5% of the loan books of three Singapore banks based on the latest data.
Mortgages, Auto-Demand to Support Consumer Lending
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Private residential completions should support consumer loan growth, which rose 9.6% year-on-year in May. UOB, with 24% home-loan exposure vs. peers' 19-21%, will benefit from steady, mid-single-digit growth in private residential mortgages. Loan disbursements for new, private homes should stay healthy, as 25% and 15% of the purchase price comes due upon obtaining the Temporary Occupation Permit and the Certificate of Statutory Completion. Some 911 private residential units were completed in 1Q, with a further 5,371 units expected this year, according to Urban Redevelopment Authority data. Rising home prices should support home-loan growth by increasing mortgage sizes.
Auto-loan demand, up 18.5%, should stay strong with EV tax incentives extended till the end of 2026.
Stimulus Measures in China to Fuel DBS' Loan Book
DBS generates over 20% of its net income from Greater China and continues to sharpen its focus on the Greater Bay Area. OCBC and UOB are accelerating their Southeast Asian-Greater China growth plans as supply chains shift, with UOB selling its China retail arm to focus on corporate demand.
