OCBC warns of greater challenges in H2 as ‘chain reaction’ from US tariffs unfolds

While OCBC posted “stronger than anticipated” results in the first half of 2025, the lender will likely face more challenges in the second half, said group chief executive officer Helen Wong.

OCBC benefited in the first half from better-than-expected gross domestic product growth across the region, boosted by front-loading activities ahead of US tariffs and government policy support, she said at the bank’s second-quarter results briefing on Friday (Aug 1).

But the second half will be clouded by uncertainty and challenges from tariffs and heightened geopolitical tensions, inflationary impact, as well as further fragmentation of global trade, she added.

The bank on Friday posted a 7 per cent fall in Q2 net profit to S$1.82 billion, largely due to a decline in interest rates in Singapore and Hong Kong.

While the earnings beat the S$1.79 billion consensus forecast by a Bloomberg poll of six analysts, OCBC expects global and regional growth to be slower in H2.

OCBC head of global wholesale banking Tan Teck Long said the chain reaction caused by US tariffs “hasn’t fully manifested itself yet”.

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When tariffs charged on China were in the triple digits, its merchandise found its way to other markets, causing some local businesses to suffer from intense competition, said Tan, who is also deputy CEO and slated to take over the top job in 2026.

He noted a silver lining, however, for many businesses that import raw materials for activities conducted domestically, especially in Singapore.

The construction industry could benefit from a lower cost of raw materials, for example.

Customers are also re-evaluating their investment decisions due to the uncertainty, although trading flows are still “business as usual”.

“So depending on (how the tariffs pan out), there’s a chain reaction, which currently is still developing,” he said.

Tan said OCBC’s loan growth remains healthy in H1 as many of the industry sectors it focused on derive their demand domestically or regionally.

In H2, the lender will continue to look into these areas – which include data centre projects, real estate in Singapore and project financing – to meet its mid-single-digit loan growth target for 2025, he said.

Trade tariffs have a first order impact on 3 per cent of OCBC’s loan book, while two-thirds of its book are in sectors with strong domestic focus.

Meanwhile, to account for uncertainty and volatility, the lender put aside additional expected credit losses for Q1 and Q2 as trade negotiations progressed.

This included overlays for businesses hit by tariffs or a slowdown in global trade.

Wong said the lender will continue to review its overlays as tariff negotiations continue.

Currently, she does not see significant weakness in OCBC’s portfolio, although she highlighted that the Hong Kong commercial real estate sector remains a closely watched area.

Nevertheless, Wong maintains a long-term positive on regional growth.

She said: “Asia is still the place to be, and trade, investment and wealth flows across the Asean and Greater China region continues.”