The solid set of results turned in by the three local banks have soothed some of the concerns over the banks' exposure to the oil and gas sector, and to slowing China.
And while market conditions look set to deteriorate, the local banks are facing these headwinds with strong balance sheets.
At a results briefing yesterday, DBS Group chief executive Piyush Gupta said: "It's not been an easy environment and continues to be challenging as we go into next year.
"That notwithstanding, I think the market panic is overdone. It's quite clear to me we are very far from a Lehman kind of crisis. There is nothing I see in the macro environment that would warrant the degree of pessimism and the whole crisis mentality in the market right now," he said.
DBS' loans portfolio is healthy, he said, with the non-performing loan (NPL) ratio - the proportion of non-performing loans over total loans - coming in unchanged at 0.9 per cent for the three months to Dec 31, from a year earlier.
Higher NPLs could translate into weaker earnings for banks.
He added that the bank has had fairly flat NPL ratios for several quarters at 0.9.
OCBC also achieved an NPL ratio of 0.9 per cent in the fourth quarter, higher than 0.6 per cent a year earlier, while United Overseas Bank (UOB) reported an NPL ratio of 1.4 per cent, up from 1.2 per cent.
The heads of the two latter banks also acknowledged that bad debts could rise in the quarters to come, with UOB chief executive Wee Ee Cheong saying its NPL ratio could rise to as high as 2 per cent "in a worst-case scenario".
Despite the grim outlook, all three banks sounded confident that they can weather the storm relatively unhurt, as they have set aside enough provisions to accommodate deteriorating loan books, if oil prices stay depressed or even fall to US$20 per barrel, and China continues to slow down.
The markets have not been kind to bank stocks, as investors react to falling oil prices, now less than US$30 a barrel, and China's growth slowdown.
Since the start of the year, DBS has fallen about 18.4 per cent to $13.62, OCBC by 9.7 per cent to $7.95, and UOB by 12.6 per cent to $17.14.
There seemed to be some respite for banking stocks last Friday, as UOB and DBS inched up.
However, DBS' announcement of a record net profit yesterday was not enough to keep up that momentum as all three stocks lost ground again - a sign perhaps that investors fear worse is yet to come.
The mixed feelings were reflected by analysts, following the banking results.
NRA Capital's banks analyst Lynn Look kept an "avoid" recommendation for DBS: "The exposure to the oil and gas sector is 70 per cent in the riskier upstream segment."
She added: "We expect sentiment to get a lift as DBS outperformed expectations but this will still be limited as uncertainty persists and falling crude prices will also weigh on investors' minds."
RHB Research continues to have a buy call on OCBC, citing "limited risk of NPL ratio and credit cost rising to global financial crisis levels", even if it expects the bank to report further increases in NPLs this year.
"This is as OCBC is actively working with customers to keep their vessels employed," said RHB Research.
CIMB Research analyst Kenneth Ng said the top pick for bank stocks is OCBC, follow by DBS and UOB.
He said OCBC has made provisions early on for the oil and gas sector in the previous quarter, and excluding the oil and gas NPLs, its other NPLs are well-behaved. He added that its provisioning coverage of unsecured NPLs is the highest among the three banks.
"That said, all three banks have been punished significantly, trading below price-to-book value."