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Ratings Agency Smiles On Singapore's "Big Three" Banks

Tom Burroughes, Group Editor, 21 February 2014

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Singaporean banks should remain resilient in the face of a more challenging operating environment this year, following solid results in 2013, says Fitch Ratings.

Singaporean banks should remain resilient in the face of a more challenging operating environment this year, following solid results in 2013, says Fitch Ratings, the credit rating agency, commenting after a number of the jurisdiction’s banks have issued full-year results.

The agency said recent attempts by the Singapore authorities to cool a red-hot property market will slow down banks’ loan growth and other performance markers, as will volatility in local emerging markets.

It said the three “main banks” – DBS Group, Oversea-Chinese Banking Corporation, and United Overseas Bank, “should be able to maintain their intrinsic financial strength and sustain their solid loss-absorption capability”. All three banks, which provide services including wealth management, enjoyed generally stronger results in terms of profits and revenues in 2013.  

“Core capital is around 11 per cent of risk-weighted assets - among the highest of highly rated banks, globally - and capital buffers should remain sufficient,” the agency continued.

More negatively, Fitch said it expects non-performing loans, as a share of the total, to rise from a low point of 1 per cent at the end of last year. Rapid loan growth is happening at a time when several emerging markets (China, India and Indonesia) have been volatile, it said. Even so, the banks should be able to manage through this process, it said.

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