The worst may be over for Singapore's top banks

BEIJING: A stronger economy, higher interest rates and rising wealth is expected to boost income at DBS Group Holdings Ltd., Oversea-Chinese Banking Corp. and United Overseas Bank Ltd. After several quarters hit by bad loans, a Bloomberg survey shows they're poised to post double-digit profit growth for the three months ended Dec. 31. -- the first time all three will do so since 2014.

DBS, the largest lender in Southeast Asia, will report earnings Feb. 8, followed by OCBC and UOB on Feb. 14.

The trio posted lower profit a year ago mainly because loans to the offshore energy services sector were going bad. DBS's aggressive classification of nonperforming assets between July to September -- which led to the steepest drop in profit since the 2008 financial crisis -- means that's clearing up now. Impairment charges at DBS will fall 51 percent on-year to S$225 million ($172 million), according to analysts at Goldman Sachs Group Inc., led by Melissa Kuang. Goldman's also forecasting lower provisions for OCBC and UOB.

The banks are being helped by Singapore's faster-thanexpected economic growth and rising U.S. interest rates, which are pushing up local borrowing costs. Solid economic expansion means OCBC may see loan growth of 8 percent onyear in 2017, DBS 7 percent and UOB 6 percent, Morgan Stanley's Nick Lord estimates.

The double whammy of stronger demand and rising rates allowed the banks to charge more for loans, boosting net interest income. The three-month Singapore interbank offered rate hit a decade-high in January, and while it has dipped since then the impact will probably linger as local lenders typically adjust borrowing costs only after a few months.

Rising wealth in Asia is another factor likely to support the fourth quarter results of the Singapore banks.