Risks are manageable, and the banks' bond spreads are likely to be rangebound in 2H2025 on solid credit.
Singapore banks' risks in Greater China (mainland China, Hong Kong, Macau, Taiwan) are limited, with gross bad-loan ratios capped at 3% in 1HFY2025 and buffered by ample provisions and capital, even as risk-return stays weak in the near term amid the region's uneven recovery.
The area contributes more to bad loans than profits, but material stress isn't likely.
Risk-return in the region may improve medium term as banks grow lending in new-economy areas, capture Sino-Asean trade and investment flows, and lift transaction banking and wealth management.
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Oversea-Chinese Banking Corporation (OCBC) targets $3 billion in incremental revenue by 2025 via its Asean-Greater China focus; DBS Group Holdings is scaling up locally via SRCB Alliance with wealth-management connect southbound services; while United Overseas Bank (UOB) is pivoting to wholesale, markets and cross-border growth after selling Fubon Bank China.
Singapore banks may prioritise targeted growth in Greater China over the near-to-medium term, leveraging opportunities in transaction banking, wealth management, Sino-Asean investments, and cross-border business.
Supply-chain diversification amid tariff uncertainties and "China Plus One" strategies to expand investment beyond the mainland, along with efforts to attract sticky deposits and boost fee income amid expected rate cuts, could support this focus.
The Singapore banks remain cautious onshore, given slowing growth across the broader region despite stimulus expectations.
Loan-exposure growth in Greater China region has already slowed, with all three local banks reporting flat to negative loan growth there as of 1HFY2025.
