DBS loan demand to remain strong in H1, full-year growth likely at 5% to 6%: CEO Tan Su Shan

[SINGAPORE] DBS expects its loan demand will remain strong in the first half of 2025, but warned that it may slow in the second half if the trade war persists, said chief executive Tan Su Shan.

The lender is projecting its full-year loan growth to be around 5 to 6 per cent, depending on how loan demand fares in the second half of 2025.

Nevertheless, Tan expects DBS has other assets – which will be interest-bearing and have good return on equity (ROE) – that it can deploy its deposits into, even if loan demand falls, she said at the lender’s first-quarter 2025 results briefing on Thursday (May 8).

“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,” she said.

“That said, we want to continue to garner more deposits and then deploy them into other kinds of assets.”

Quarter on quarter, loans were up 2 per cent in constant-currency terms to S$435 billion as at March 2025, led by non-trade corporate loans.

“It was a solid, good quality, large corporate, deal-driven loan book, and that’s the kind of loans we want to grow. It’s franchise driving, it’s good ROE, and it deepens relationships long term,” Tan said.

Deposit growth in the quarter was strong, said Tan, with the momentum set to continue. Q1 deposits were up 3 per cent at S$576 billion as at March 2025, led by current and savings account (Casa) inflows.

Casa growth will also mitigate the decline in interest rates. The lender kept its guidance for 2025’s group net interest income to be slightly above 2024 levels, even after raising rate-cut expectations to three cuts this year in line with market expectations.

Heightened uncertainty

The lender took general allowances of S$205 million in Q1 to strengthen its reserves amid macroeconomic and geopolitical uncertainty.

“Given that we closed our books after ‘Liberation Day’, we should exercise some prudence. And given the good first quarter, we thought it was a wise thing to do,” said Tan, who noted that business momentum remained resilient in April.

While Tan noted a pause in some longer-term investments as corporates await more clarity, she sees limited impact to “first-order risks” – which are direct risks on sectors and countries – given that its exposure to US-China flows is muted.

In fact, DBS will likely benefit from shifts in trade and supply chains, as intra-regional trade within Asia and with the Middle East and Europe picks up.

“The good news is that trade outside the US still remains pretty robust, and you work towards that shift in focus from just selling to the US or the West to looking at trade flows outside the US.”

The lender is looking at new supply chain and sea logistics links, and could potentially see more demand for inventory financing, alternative currencies and liquidity solutions.

Instead, the lender continues to stress test for “second-order risks” arising from a macroeconomic slowdown and fall in consumer confidence.

Meanwhile, India’s structural growth story remains positive, despite geopolitical concerns and the tariff war, with “good trade flows” from North-east Asia and western multinational corporations into India.

Q1 profit falls

Q1 net profit fell 2 per cent on the year to S$2.9 billion due to higher tax expenses from the implementation of the 15 per cent global minimum tax, beating the S$2.87 billion consensus forecast in a Bloomberg survey of eight analysts.

The lender declared a total dividend of S$0.75 a share for Q1, comprising an ordinary dividend of S$0.60 and a capital return dividend of S$0.15, up from S$0.54 a share in the year-ago period.

For the commercial book, total income was up 4 per cent on the year at S$5.54 billion.

Net interest income for the segment rose 2 per cent to S$3.72 billion, as a nine-basis-point decline in net interest margin (NIM) to 2.68 per cent was more than offset by balance sheet growth.

Commercial book net fee and commission income was up 22 per cent at S$1.28 billion, as wealth management fees grew from strong market sentiment and higher assets under management, while loan-related fees rose with increased activity.

Treasury customer sales and other income for the segment fell 12 per cent to S$548 million, due to non-recurring items, while treasury customer sales grew 11 per cent to a record.

Meanwhile, its markets trading income rose 48 per cent to S$363 million, partly reflecting lower funding costs.

Overall, group NIM fell to 2.12 per cent for the quarter, from 2.14 per cent in the previous corresponding period.

The bank’s non-performing loans ratio was flat at 1.1 per cent.

“(Q1) was a solid quarter – we were firing on all cylinders,” Tan said. “Our structural growth remains… the cyclicality and the volatility that comes with a slowdown and tariff uncertainty, we can deal with.”

Shares of DBS closed 0.8 per cent or S$0.33 higher at S$43.09 on Thursday.