Local banks DBS, OCBC and UOB face increased risks and slowing income growth amid worsening economic conditions despite a record-breaking first half, a report noted yesterday.
Mr Simon Chen, vice-president and senior analyst at Moody's Investors Service, said: "The banks posted record net profits, stable asset quality and strong capital but further improvement in profitability will be difficult amid slowing global growth, and the potential for an escalation of the US-China trade conflict.
"Specifically, we expect income growth to slow because net interest margins will either stagnate or decline, as central banks globally cut rates, while credit costs will rise and loan growth will moderate due to the increasingly uncertain environment."
Income contributions from trading and wealth management will also be volatile, said the report.
The credit ratings agency said non-performing loan ratios remain low for all three banks, but added that this "will deteriorate amid rising volatility".
That said, all three banks continue to report robust capitalisation and liquidity, Moody's noted.
In addition, capital ratios should remain above 13 per cent this year, within the banks' target ranges of around 13 per cent to 13.5 per cent thanks to robust retained earnings.