Singapore banks' earnings outlook dims as markets wobble

Loan growth will be slower than expected.

Banks will struggle to boost their earnings in 2015 and 2016 amid escalating volatility in the global economy.

In particular, UOB and OCBC will grapple with much slower loan growth, higher non-performing loans and provision charge off rates, according to a report by DBS Vickers.

DBS said that loan growth will hover at below 5% for both years, due to the prospect of higher interest rates coupled with wobbly macro fundamentals.

"To reflect our cautious view over FY15-16F, we lowered our loan growth assumptions across the banks to sub-5% for both years. But if our bear case scenario materialises, we could see loan growth falter to 2008/09 levels. This could bring our loan growth assumptions down to a mere 3%," DBS said.

On a positive note, net interest margins (NIM) should stay intact as long as the SIBOR stays elevated.

DBS trimmed its earnings forecast for FY15 by 1-4%, while its FY16 earnings assumption has been reduced to 6% from 8%.