Moody's Investors Service said in a new report on Tuesday that Singapore's banking system outlook remains stable. But the long-term ratings of its three rated Singaporean banks namely DBS Bank Ltd, Oversea-Chinese Banking Corporation Ltd, and United Overseas Bank Ltd are negative.
The rating agency expects the Singaporean banks will leverage their rich SGD deposit funding to expand loans, in line with rising demand for working capital and investment in the corporate sector and for housing loans in the consumer sector.
Further, Moody's assessed that fee and commission income from loans and trade financing will possibly increase, providing additional support for banks' non-market sensitive earnings. Meanwhile, credit costs should moderate as the banks progress from the credit down-cycle leading to improved risk-adjusted profits.
Christine Kuo, a Moody's VP/Senior Analyst said Singapore's long-term economic growth could be less robust than before the global economic slowdown. However, the positive effects of the stimulus measures should continue to benefit the nation in the near term. "Furthermore, growing intra-regional trade among the ASEAN and Asian economies should help Singapore lessen its reliance on traditional US and European demand and to sustain moderate economic growth," said Kuo.
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