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Thread: Property boom unlikely to hurt S'pore banks' risk ratings: Moody's

  1. #1
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    Default Property boom unlikely to hurt S'pore banks' risk ratings: Moody's

    July 14, 2007

    Property boom unlikely to hurt S'pore banks' risk ratings: Moody's

    By Robin Chan


    THE current property boom is unlikely to hurt the risk ratings of Singapore's banks, according to leading ratings agency Moody's Investors Service.

    Banks are 'not getting too involved in the property market', Ms Deborah Schuler, a Moody's senior vice-president, said.

    She told reporters that banks in Singapore typically 'finance only the largest developers... who have the resources to have staying power in a downturn and complete buildings'.

    Banks have also been more cautious about the developers they have on their books since the last market peak in 1996, she said.

    She added that banks take on mortgages that 'tend to be very low risk'.

    The biggest concern 'would be in mortgages as interest rates in the region rise', she said.

    So far, however, 'liquidity in the system' has been good, Ms Schuler said.

    Singapore's banking sector won high ratings from Moody's, while its outlook is also stable because of the strong balance sheets and improved risk management of banks.

    Moody's maintained stable or stable-to-positive outlooks for the 16 banking systems it rates in the Asia-Pacific.

    Among the South-east Asian banking systems rated by Moody's, those of Vietnam and Indonesia received positive outlooks.

    The report highlighted certain potential problems that could affect the banking sector in Asia, including rising energy prices and the risk that Asia's business cycle may reach its peak in a year or two.

    In a separate report, Moody's maintained the highest possible credit rating for the Singapore Government. The outlook for it is also stable.

    This was attributed to the continued fiscal strength of the public sector and strong external balance of payments.


  2. #2
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    Default Re: Property boom unlikely to hurt S'pore banks' risk ratings: Moody's

    Weekend, July 14, 2007

    Local banks still in the game

    Channel NewsAsia


    THE big-three local banks DBS, OCBC and UOB have seen an erosion in their market share since the introduction of foreign competition in 1999. According to Moody's Investors Service, their market share in loans and deposits has dropped from 75 per cent to about 70 per cent.

    But they are still expected to dominate in Singapore's consumer and small and medium enterprises market. The local banking sector enjoys the highest rating of triple A by Moody's.

    Ms Deborah Schuler, senior vice-president of Moody's Singapore, said: "They've probably lost in aggregate about 5 percentage points of loans and deposits, particularly in the consumer segment that's opening up more to the (Qualifying Full Bank licences)."

    "They are fairly rationale competitors so they're not doing too much cut-throat pricing ... that's certainly slowed down a bit from the earlier years of the opening up in Singapore. And if anything, I think we've seen UOB go from the single largest domestic lender in Singapore to seeing DBS edge them out a bit, but the changes are fairly minor in aggregate."

    The recent property boom has also raised questions about the exposure of the banks to the sector. But the analysts say that is not a concern at the moment, as the lenders have learnt well from the 1997 financial crisis.

    Ms Schuler said: "They lend to developers, typically where the highest risk is, and they tend to focus on the major players. They also have staying power if things should get bad, which we're not expecting right away. And individuals are on the whole still very good credit risks. So, the mortgages are often some of the safest loans banks ever make."

    Moody's is forecasting that Asia still has a year or two before peaking in its economic cycle and so, it believes this year is going to be as good as the last for the local banks.

    And barring any crisis worldwide, so will next year.

    It expects the big three to expand into China, Indonesia and Vietnam but this will affect their ratings' outlook, as the banks have yet to prove they can manage the operational risks in these emerging markets.

    Channel NewsAsia


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