Among the Asean states, the Philippine banking sector had the highest RWA density as of 4Q2024, which is more than the BBB-rated counterparts in the region. “[This reflects] an aggressive build-out of higher yielding retail loan portfolios in 2023 - 2024.”
In a separate note, Kwok believes that the three banks’ capital returns are on track despite the tariff shocks.
“Capital accumulation has outpaced risk-weighted-asset growth and should continue, supported by resilient earnings, tight risk control and prudent lending amid macro uncertainties,” she writes.
The banks’ “sound capital and risk management” means that they could also maintain their plans to boost their shareholder returns despite the tariff-led economic and trade risks, she adds.
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United Overseas Bank (UOB), which led the round of the banks' first quarter results, stated that it remains “committed” to its previously-announced $3 billion capital distribution plan.
DBS Group Holdings, which is set to release its results on May 8, should still retain its capital-return plans thanks to its robust capital and risk management, Kwok writes in a May 2 note.
To this end, Kwok forecasts banks reporting low single-digit RWA growth in 2025 due to expected interest rate cuts and amid cautious lending under macro uncertainties.
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Earnings should remain resilient, she adds, although prolonged tariff pressures could heighten downside risk.
As of the mid-day break, shares in UOB are trading 42 cents lower or 1.2% down at $34.56. Shares in DBS fell by 12 cents or 0.28% at $42.87. Shares in OCBC fell by 15 cents or 0.92% to $16.09.
