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SINGAPORE: According to credit ratings agency Moody's, Singapore's banking system outlook is stable.
However, it added that the long-term ratings of its three rated Singaporean banks - DBS, OCBC and UOB - are negative. The agency's latest report noted that a gradual economic recovery will set the stage for better prospects for the banks.
Moody's also expects the local banks to leverage on their Singapore dollar deposit funding to expand loans in line with increasing demand.
It is of the view that the increase in volume will have a positive impact on the banks' net interest income, even though the loan spread may not improve because of competition.
The report also observed that Singaporean banks have been more resilient than other banks, having experienced limited damage to their asset quality.
But despite the stabilizing operating environment in Singapore, Moody's outlook for the long-term ratings of the three banks is negative. It said all three local banks have significant exposures outside of Singapore.
Given the banks' high ratings, Moody's said it needs to ensure the banks' overseas operations also stabilize before the rating outlook can be revised back to stable.
- CNA/sc
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