Slowing economy may bring more bad debt

Muneerah February 11, 2015

More bad debts are expected to show up if Singapore’s economy continues to slow, according to DBS Group Holdings CEO Piyush Gupta as quoted in the media.

However, the overall loan book of DBS, which is Southeast Asia’s largest bank, should be okay, said Gupta at a press conference on the bank’s Q4 results.

Notably, the bank’s non-performing loan ratio dropped to 0.9 percent as at end-2014 from 1.1 percent at end-2013, while total customer loans expanded by 11 percent to $275.6 billion in 2014.

He expects Singapore to be slow this year as there are a lot of restrictions on the small and medium enterprises (SMEs). Pressure on the property sector is also expected to continue, he said.

A survey of property developers released in January showed that over 70 percent of the respondents expects property prices to fall five to 10 percent in 2015, while new sales volume are expected to drop by 15 to 20 percent.

“No imminent stress but if Singapore has a slow year, we should see some pickup in credit costs,” said Gupta.

Gupta revealed that DBS has repeatedly conducted stress tests across the various sectors of its loan portfolio but has not detected any weaknesses.

“On the portfolio as a whole – in consumer, SME, corporate – in terms of delinquencies, in terms of general stress, we are not seeing anything there. It continues to be relatively solid and strong.”

He noted that delinquencies in Singapore’s mortgage book have been reducing since most of the borrowers are owner occupiers and the loan-to-value ratio is low.

 

Muneerah Bee, Senior Journalist at PropertyGuru, edited this story. To contact her about this or other stories email muneerah@propertyguru.com.sg

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