Business support measures to sustain banks’ asset quality

 Wealth management income will benefit from stock exchange-related incentives.

Singapore’s commitment to aiding companies— via tax incentives, rebates, and more financing options— will help local banks keep their asset quality benign.

During the Budget 2025 speech on 18 February, Singaporean Prime Minister Lawrence Wong announced several measures to aid companies such as a 50% corporate income tax rebate, and tax incentives for listing in the local stock exchange.

The government also announced a S$1b Private Credit Growth Fund to provide more financing options for high-growth local enterprises.

The continued support measures to help companies cope with cost pressures should be helpful in keeping banks’ asset quality benign, said Shekhair Jaiswal, analyst for RHB Group, in a report on Singapore 2025 Budget.

“Meanwhile, efforts to lift the attractiveness of the local stock market should generally be positive for wealth management income,” Jaiswal said.

Regarding the private credit funds, this is still at an early stage in this region and, generally, unlikely to be a major threat to bank lending at this juncture, Jaiswal said.

“Longer-term, if the private credit market turns out to be sizeable, it will be interesting to see the strategies the banks adopt, i.e. co-operate or compete with this asset class,” he said.

Investment-wise, Singapore bank stocks offer investors solid defensive options. Their earnings downside risk should also be limited with fewer US federal fund rate (FFR) cuts anticipated. Their dividend yields are also expected to remain attractive.