Fitch: Singapore banks well capitalized

Fitch said that Singapore banks are unlikely to face a significant increase in non-performing loans in the event of a modest correction in real estate prices partly as a result of a relatively buoyant labor market.

Singapore's unemployment rate is among the lowest in the world, less than 2.5%, Fitch said, and the city state has already seen a decline in mortgage and construction loan delinquency rates since mid-2009.

Local authorities are likely to implement more measures to curb excessive speculation, which if unchecked could have a negative impact on the banking sector, the agency said.

DBS Bank, rated AA- with stable view, United Overseas Bank, rated AA- with stable view, Oversea-Chinese Banking Corp., rated AA- with stable view, also are among the most well-capitalized in the Asia-Pacific region, Fitch said.

Fitch said it expects the three Singapore lenders to post net interest margins of about 2.1% and about 1.3% for return on assets.

Thai banks appear to have the capital buffer to negotiate the ongoing political risks, which, if prolonged, is expected have an adverse impact on their performance, while some Indian banks' performance could be affected by higher specific provisioning requirements and may require additional high-quality capital to support rapid loan growth, the agency said.

Accelerating loan growth at China's banks has considerably raised their credit risk exposure, pressured capital and funding, making future asset quality deterioration a near certainty, Fitch said.

© 2015 Prospect News.
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