Singapore’s net interest margins to peak in 2024: S&P

NPL ratio will remain below 2% and NIMs may peak at up to 2.2%.

Singapore’s net interest margins (NIM) will peak in 2024 at 2% to 2.2%, according to S&P Global Ratings, with local banks’ lending spreads benefitting from higher-for-longer interest rates.

This does not mean that Singapore banks are fully in the clear, however. The realities of higher borrowing costs, coupled with macro headwinds, will register more prominently in 2024, the ratings agency said.

“This could result in some backsliding in nonperforming loan (NPL) ratios following a relatively stable 2023,” S&P primary credit analyst Ivan Tan wrote in an outlook report.

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The bad loans ratio is expected to remain below 2%, however, which should be manageable for banks.

Expect low single digit loan growth of over 1% to 3% over the next 12 to 18 months, and credit costs in the pre-COVID range of 20 basis points (bps) to 25 bps.

Meanwhile, the government is expected to provide financial support as necessary.

“[The] Singapore government is highly supportive of the banking system. We believe it will provide timely financial support to ensure the stability of the financial system, if needed. This in turn supports the banks' financial profile,” Tan added.