By Yantoultra Ngui

SINGAPORE (Reuters) - Singaporean banks are set to report stronger profits for the fourth quarter, but growth could take a hit this year as U.S. President Donald Trump's trade tariffs and other policies threaten to undermine the global economy, analysts say.

Singaporean banks, Southeast Asia's largest by assets, are forecast to post higher fourth quarter net profit on-year, driven by robust net interest income and higher fees income, LSEG estimates showed.

The banks, similar to their regional peers, have benefited from a higher-for-longer interest rate environment and strong inflows of wealth underpinned by the city-state's political stability.

However, Trump's trade tariffs on China, and the threat of duties on other U.S. trading partners, pose risks to Singapore, a major global trading and financial hub. The main worry, analysts say, is an escalating cycle of tit-for-tat tariffs sparking a broader global trade war.

"In such a scenario, local banks might need to increase provisions for potential bad debts amid rising growth risks, which could come at the expense of earnings," said Yeap Jun Rong, market strategist at trading platform IG.

"Additionally, heightened global uncertainty could dampen loan demand, as businesses and consumers adopt a more cautious stance on borrowing and spending," he added.

DBS Group, the biggest among the three Singapore lenders, is projected to record a 9.8% rise in net profit in the October-December period versus a year earlier, according to LSEG estimates.

Oversea-Chinese Banking Corp (OCBC) and United Overseas Bank (UOB) are forecast to post net profit increases of 11.6% and 4.3% during the quarter, respectively, the estimates showed.

DBS is scheduled to announce results on February 10, while OCBC and UOB are due to release theirs on February 19 and 26, respectively.

Besides the outlook, analysts said a key focus during the earnings announcements will be on capital return plans, such as potential special dividends and bigger share buyback program, following strong earnings by the banks in previous quarters.

UOB could "surprise" the most followed by DBS with special dividends, according to Thilan Wickramasinghe, Maybank Investment Banking Group's head of research for Singapore and regional head of financials.

Looking ahead, some moderation in banks' earnings is on the cards as Singapore's economy, which grew 4.0% in 2024 for its fastest pace in three years, is forecast to slow to 1.0% to 3.0% in 2025.

The country's central bank said in late January the impact of shifts in global trade policies could weigh on the domestic manufacturing and trade-related services sectors.

On the flip side, Maybank's Wickramasinghe also raised a potentially beneficial scenario for banks stemming from an inflationary environment created by Trump's tariffs.

"This would make the Fed cautious on easing too early. A higher for longer interest rate scenario is likely to support net interest margins for the Singapore banks."

(Reporting by Yantoultra Ngui; graphics by Vineet Sachdev in Bengaluru; Editing by Shri Navaratnam)