Ratings firm Standard & Poor’s (S&P) said banks in Singapore continue to be stable as it affirmed its ratings for UOB, OCBC and DBS.
S&P gave DBS an AA- long-term rating with a stable outlook and an A-1+ short-term rating, whilst OCBC and UOB both received an A+ long term ratings with a stable outlook and short-term ratings of A-1.
Based on a dual rating methodology of S&P, AAA is the highest rating for long-term obligations of a financial institution, and A-1+ for short-term obligations.
“These banks have liquid, well-capitalised balance sheets and healthy credit portfolios, protected by proactive risk management and sensible risk appetites,” said Mr. Ivan Tan, S&P’s credit analyst.
The rating agency believes UOB and OCBC both excel in terms of asset quality and better profitability. But in terms of physical and franchise presence, DBS is stronger compared to its peers, said the agency.
S&P revealed it could rate OCBC higher if “its operating performance consistently improves, supported by a higher and steady stream of fee-based income, strengthening the bank’s balance sheet.”
OCBC’s recent acquisition of Bank of Singapore could give further earnings diversity, said the agency. This may offer opportunities for OCBC to cross-sell its traditional banking products to private banking clients.
As for UOB, the agency believes that its franchise in the domestic market continues to support the bank, but its overseas operations continue to lag its peers.
Analysts believe that DBS, the largest bank by assets in Southeast Asia, will maintain its strong performance in the region. But most analysts are closely watching whether the bank can increase its presence beyond the region.
“Out of the three banks, DBS’ regional reach is the strongest. So, the next uphill task for DBS will be whether it can move up from being a regional bank, to being a well-known Asian bank or even global bank,” said Mr. Roger Tan, vice-president of Sias Research.
Sias Research forecasts that UOB could be the strongest performer in the next quarter, citing that the strength of UOB lies primarily in its nimbleness and quick ability to recognise a potential growth area.
In June, rating agency Moody’s also announced its ratings for the three leading local banks, stating problems in the eurozone will have limited impact on Asian lenders.