Singapore banks’ net interest margin are past their peaks: S&P

NIMs seen falling by 10 basis points each year over the 2024-2026 period.

Banks in Singapore may have already seen their net interest margins (NIMs) reach their peak earlier this year as the US Federal Reserve is anticipated to make its first rate cut in the fourth quarter, according to S&P Global Ratings.

In a note, S&P said NIMs hovered around 2% to 2.2% earlier this year and are likely to dip by about 10 basis points each year over the 2024-2026 period.

Borrowing activity in the city-state could pick up following the rate cut. The credit rating agency projected a 3% to 5% loan growth for Singapore banks over the next 18 to 24 months, with credit costs staying within pre-pandemic levels of 15 to 20 bps.

“We believe bank managements will continue to exercise good judgment in both capital and risk management, and tailor decisions according to credit conditions,” S&P said.

It warned that higher-for-longer rates could push the banks’ nonperforming loans higher.S&P projects Fed to deliver a total of 250bp cut by the second half of 2026.