Moody’s keeps Singapore bank outlook at stable amid healthy economic growth

POSB, OCBC, UOB and Citibank ATMs in Singapore.POSB, OCBC, UOB and Citibank ATMs in Singapore.

The outlook for Singapore’s bank is stable over the next 12-18 months amid healthy economic growth and expectations for better profitability, Moody’s Investors Service said in a note on Monday.

“Healthy economic growth will support the banks’ asset quality, while higher interest rates and a decrease in impairment allowances will lift
profitability,” Eugene Tarzimanov, a senior credit officer at Moody’s, said in the note.

The ratings agency said it expected Singapore’s real gross domestic product (GDP) growth to moderate to 3.0 percent and 2.5 percent in 2018 and 2019 respectively, from 2017’s 3.6 percent, although it added that was still “solid” growth. That was expected to support the stable operating environment, it said.

Moody’s also expected the banks’ asset quality would remain stable as new problem-loan formation levels normalized and as asset quality was supported to benign macro conditions, higher oil prices and mild interest-rate increases.

Rising interest rates in Singapore, in line with rate hikes in the U.S., were set to improve the banks’ interest margins, Moody’s said.

“The banks’ profitability levels will increase on margin improvements, with lower credit costs and higher non-interest income,” it said.

Moody’s has kept a stable outlook on Singapore’s banking system since May of 2017.

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