S'pore banks able to withstand a sharp property fall: Fitch

Potential earnings impact manageable due to a proactive regulator and measures introduced to curb excessive debt

Published Tue, Aug 30, 2016 · 09:50 PM

Singapore

SINGAPORE banks are strong enough to withstand a sharp downturn in the property market despite their large exposure to the sector, said Fitch Ratings.

The downside risks for banks would be modest even if housing-loan quality were to deteriorate drastically, it said.

Fitch said its worst-case scenario of a 45 per cent home-price collapse with housing non-performing loan (NPL) ratio of 5 per cent (end-June 2016: 0.4 per cent) - would shave 17 per cent to 24 per cent off their 2015 earnings. This excludes the negative impact of the stress on the other parts of the banks' business.

During the 1997-1998 Asian financial crisis, the three local banks - DBS Group Holdings (DBS; AA-/Stable), Oversea-Chinese Banking Corp (OCBC; AA…