Manufacturing, transport-related sectors flagged as asset quality and profitability worsen

A CHALLENGING environment has eaten into the quality of assets at Singapore's banks and corporate profitability. Those in the manufacturing, commerce, and transport, storage and communications (TSC) sectors were particularly singled out by the central bank as of concern.

In its annual financial stability review for 2016, released on Tuesday, the Monetary Authority of Singapore (MAS) said the overall ratio of non-performing loans (NPLs) had increased to 2.1 per cent in the three months ended September 2016, from 1.5 per cent a year ago.

This has resulted in the banking system's overall provisioning coverage to fall to 98 per cent in Q3 2016.

Overall corporate profitability has declined too, with the median return on assets (ROA) of Singapore Exchange-listed firms falling from 3.5 per cent in Q2 2015 to 2.8 per cent in Q2 2016.

The manufacturing and TSC sectors were hit hard amid sluggish external demand and slowing trade flows. Their NPL ratios have risen further to 5.9 per cent and 7.1 per cent in Q3 2016 respectively, said MAS.

Corporate profitability of firms in the manufacturing, commerce and TSC sectors also took a hit. Their ROAs declined by 0.6, 0.7 and 0.8 percentage points respectively in Q2 2016 on a year-on-year basis.

In the face of these developments, banks and most firms in Singapore are deemed to be resilient against shocks, said MAS.