Moody's changes Singapore banks outlook from negative to stable

Moody's says the change reflects improving growth conditions and stabilising commodity prices that will limit a further weakening in asset quality and profitability.
Moody's says the change reflects improving growth conditions and stabilising commodity prices that will limit a further weakening in asset quality and profitability. PHOTO: BLOOMBERG

SINGAPORE - Moody's Investors Service has changed its outlook for Singapore's banking system to stable from negative, saying the change reflects improving growth conditions and stabilising commodity prices that will limit a further weakening in asset quality and profitability.

The stable outlook is based on Moody's assessment of five drivers: Operating Environment (stable); Asset Quality and Capital (stable); Funding and Liquidity (stable); Profitability and Efficiency (stable); and Systemic Support (stable), according to a release issued on Wednesday (May 31).

"Loan growth will increase mildly but be sustained by the system's strong capital, funding and liquidity buffers," Mr Eugene Tarzimanov, a Moody's vice-president and senior credit officer, said.

"Improving growth momentum in Singapore's key trade partners will support export-oriented manufacturers and offset some lingering weaknesses in the local economy," he added.

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Moody's expects real GDP growth in Singapore (Aaa stable) to edge up to 2.2 per cent in 2017 and 2.5 per cent in 2018, from 2 per cent in 2016. Credit growth will also rebound to mid-single digits in this outlook, after almost flat growth in 2016.