After a year of post-rate-hike digestion, Singapore banks are repositioning their loan books for a more balanced growth trajectory in 2026. The focus is shifting from margin defense to volume expansion and geographic diversification.
Loan Growth from Trade and Infrastructure
Singapore banks are expected to grow total loans by 4% to 5% in 2026, driven by ASEAN infrastructure spending and supply chain reconfiguration. The Regional Comprehensive Economic Partnership (RCEP) has boosted intra-Asia trade flows, creating demand for trade finance and working capital loans. DBS has a particularly strong position in cross-border trade between China, India, and Southeast Asia, while UOB’s acquisition of Citi’s consumer portfolio has expanded its unsecured lending base.
Sector-Specific Opportunities
Renewable energy projects in Vietnam and Indonesia, data center construction in Malaysia, and logistics hubs in Thailand are attracting syndicated lending. Singapore banks typically act as lead arrangers, earning upfront fees and interest spreads. Infrastructure loans carry longer tenors but offer stable cash flows and lower default risk than cyclical consumer lending.
Managing Net Interest Income Through Deposit Repricing
Net interest income still contributes about 65% of total revenue for Singapore banks. With global central banks easing, the immediate priority is lowering deposit costs faster than loan yields fall. Fixed deposit rates in Singapore have already declined from peaks of 3.8% in 2024 to around 2.5% in early 2026. Banks are actively steering customers toward wealth products and structured deposits to reduce interest expense.
The Role of CASA Deposits
Current and savings account (CASA) balances remain the cheapest funding source. OCBC reported a CASA ratio of 48% in its 2026 investor presentation, down from 52% in 2023. Rebuilding CASA is a key strategic goal because every 1 percentage point improvement in CASA ratio can add 2 to 3 basis points to NIM. Digital onboarding and payroll partnerships are being used to attract sticky retail deposits.
China and North Asia Rebound
China’s reopening continues to benefit Singapore banks through trade finance, wealth flows, and loan demand from Chinese corporates expanding into ASEAN. OCBC derives approximately 25% of its income from Greater China, while DBS and UOB have smaller but growing exposure. Chinese high-net-worth individuals are allocating more assets to Singapore, supporting both private banking fees and mortgage demand for luxury properties.
Risks in the China Story
A sharper-than-expected slowdown in China’s property sector or a depreciation of the yuan could pressure loan quality and wealth flows. However, Singapore banks have reduced direct China property loans to under 2% of total assets. The more likely scenario is gradual recovery, with loan growth from China-related trade finance offsetting slower domestic consumer lending.
For 2026, the core investment thesis for Singapore banks is balanced: moderate loan growth, stable asset quality, and a disciplined approach to capital returns. DBS and OCBC offer higher fee income growth potential, while UOB provides the most direct leverage to Southeast Asian consumer banking recovery.
