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SINGAPORE: Ratings agency Moody's said the Singapore banks' rating outlook remains negative despite better-than-expected second quarter results.
It said in a report that while the banks' profits improved in the second quarter, the increase was primarily due to better capital market conditions. And compared to a year ago, asset quality of the banks was weaker while credit costs were higher.
All three banks have seen their non-performing loan (NPL) ratios edge up since the last quarter of 2008.
While the ratios have risen somewhat less-than-expected, Moody's said their industry NPL ratios could rise further. This could happen as a result of a lagging effect and the fact that the economy has yet to embark on a sustained recovery.
Moody's said it maintains a negative rating outlook on the three banks because the Singapore economy has yet to recover even though there have been signs of improvement.
It said until the regional economies begin to revive, Singapore banks' asset quality and earnings are likely to remain pressured.
Despite the negative rating outlook, Singapore's banks are among the highest rated in the world, with financial strength ratings of B and long-term deposit ratings of Aa1.
- CNA/yt
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