UOB, DBS, OCBC expect more earnings volatility as tariffs hit home

SINGAPORE - The impact of US President Donald Trump’s April 2 tariffs has hit home, with the three local banks and firms in other sectors bracing themselves for more market volatility amid rising trade uncertainties in 2025.

During their results briefings last week, UOB, DBS Bank and OCBC Bank reported flat or lower earnings for the first quarter of 2025 and signalled that lending activities could slow for the rest of the year if the economy unravels.

The three banks also said they have set aside sizeable allowances for 2025 as credit risks rise.

UOB on May 7 reported net profits of $1.49 billion for the first quarter between January and March, unchanged from the same quarter in 2024, as growth stalled and credit costs rose.

During the quarter, allowances for credit and other losses rose 78 per cent to $290 million as the bank beefed up provisions for a tougher year ahead.

UOB chief executive Wee Ee Cheong noted that macroeconomic uncertainties from US tariffs had triggered significant market volatility and disruptions in global trade.

Consequently, the bank will pause its 2025 earnings guidance until the macroeconomic situation stabilises.

Following the earnings announcement, Mr Wee bought 100,000 UOB shares for $34.48 per share in the open market for around $3.45 million, raising his stake in the bank to 10.755 per cent.

He had last bought shares in UOB on Feb 20, scooping up 200,000 shares at $38.65 apiece or $7.7 million in total.

DBS on May 8 posted a 2 per cent fall in net profit for the first quarter to $2.89 billion compared with the first quarter in 2024, owing to a 15 per cent global minimum tax, a requirement of large multinational corporations that took effect in January, the bank said. It was the lender’s first year-on-year drop in earnings since the first quarter of 2022.

While it is projecting a loan growth of 5 per cent to 6 per cent and expects higher net interest income in 2025, this outlook will depend on loan demand in the second half of 2025, DBS CEO Tan Su Shan said.

“If this trade war continues, and we get to a pretty bad scenario, don’t be surprised that these non-trade loans and the deals that corporates want to do will be paused,” Ms Tan said at DBS’ results briefing.

The bank is already expecting net profit for 2025 to come in below 2024’s, owing mainly to the global minimum tax.

OCBC on May 9 announced $1.88 billion in first-quarter net profits, down from $1.98 billion a year earlier, mainly on lower net interest income. It is also OCBC’s first quarterly earnings fall since the first quarter of 2022.

While it is maintaining its targets for 2025, OCBC CEO Helen Wong said loan growth will slow if economic growth in the region deteriorates as a result of the tariffs and trade shifts.

This could affect 3 per cent of OCBC’s loans, with the bank’s customers in manufacturing and goods production facing the most direct impact from US tariffs, Ms Wong said. International transport, storage of goods, raw materials and commodities could also be affected.

OCBC’s loan book stood at $322 billion as at March 31, up 7 per cent from $301 billion a year earlier.

Shares of the three banks closed flat for the week, with UOB last trading at $34.83, DBS at $43.71 and OCBC at $16.23.

Stronger Singdollar

The impact of tariffs is also being felt through a weaker US dollar. The Singapore dollar is now trading just above 1.29 per USD – up about 5 per cent year-to-date and nearing its 10-year high of 1.2807 in September 2024.

Other regional currencies, like the Malaysian ringgit, have also strengthened.

This currency shift is putting pressure on exporters and companies with US-dollar exposure, including those with international operations or that report in USD.

One example is Singapore-listed Riverstone Holdings, which on May 7 reported a 15.7 per cent year-on-year drop in gross profit to RM82.2 million (S$24.8 million) for the first quarter, partly due to the depreciation of the USD against the ringgit.

Its shares fell 15.5 per cent through the week to close at 77 cents on May 9.

Some food and beverage players have also begun feeling the squeeze.

Singapore-listed Jumbo Group reported on May 9 after the market closed a 10.6 per cent decline in first-half earnings to $7.9 million, citing higher costs and competition.

The operator of the Jumbo Seafood chain of restaurants added that it expects consumer spending to soften amid widening trade tensions in 2025, a view echoed by Japan Foods.

The food and beverage group, which owns brands like Ajisen Ramen, warned on May 5 of a “substantial net loss” for fiscal year 2025 due to weak macroeconomic conditions, among other things.

Japan Foods closed on May 9 at 25 cents, down 5.8 per cent last week. Jumbo closed flat at 27 cents before announcing its earnings.

Other market movers

Shares of ecoWise have been heavily traded since the waste management and environmental solutions company resumed trading on the Singapore Exchange (SGX) Catalist board on April 25.

Since trading resumed, the stock’s average trading volume has jumped to 4½ times its average during the one-year period from June 2020 to June 2021, before it was suspended, according to SAC Capital, the continuing sponsor for ecoWise.

The company was suspended from trading in June 2021 after it requested a trading halt as a result of internal disagreements regarding how to respond to queries from the SGX RegCo about the company’s financial results for the first half of 2021. 

The company was permitted to resume trading after it fulfilled all the relevant requirements issued by the SGX.

Ms Lee Khai Yinn, head of continuing sponsorships at SAC Capital, said the firm had worked closely with ecoWise and its professional advisers on a commercially viable plan that complied with Catalist rules so that it could resume trading.

On ecoWise’s plans going forward, its CEO, Mr Lee Thiam Seng, told The Straits Times on May 9 the company’s immediate priority was to stabilise the business and strengthen its financial position through improved profitability and leaner operations.

He added that the company had already taken steps by exiting its China operations, selling non-core Malaysian assets, and completing a private placement.

Looking ahead, ecoWise plans to tap Singapore’s Green Plan 2030 and rising global demand for carbon reduction by expanding in waste-to-energy and resource recovery, including through partnerships with government agencies and the private sector, Mr Lee said.

He noted: “Our biomass energy and resource recovery facilities are key assets aligned with the national sustainability and emissions reduction agenda and will drive our future growth.”

Shares of ecoWise closed on May 9 at 2.2 cents, down by 4.3 per cent through the week.

What to look out for

The market will be looking forward to the outcome of talks between senior US and Chinese officials. Held in Geneva, the talks are aimed at cooling the trade war that threatens to seriously damage the global economy.

Head of equities research at SAC Capital, Mr Matthias Chan, told The Straits Times that the appetite for risk has returned with things looking more positive.

“The macro situation looks brighter. The tariff impasse is thawing. The US and the UK have just cut a deal. And the rhetoric between the US and China is softening, which gives them wiggle room to negotiate positively this weekend.”

He expects trade-related sectors like financials and technology, which had been the hardest hit in the past month since the tariffs were first announced, to benefit.

“Expect them to react positively in coming weeks,” Mr Chan said.

Separately, Singapore Airlines will report its full-year results after the market closes on May 15.