Fitch Ratings affirmed the robust credit standing of Singapore’s three major banking groups, citing strong standalone credit profiles and a very high likelihood of extraordinary government support that underpins their resilience amid macroeconomic headwinds.
In a new report, Fitch said the long-term issuer default ratings (IDRs) of DBS Group Holdings Ltd, Oversea-Chinese Banking Corporation Ltd (OCBC), and United Overseas Bank Ltd (UOB) remain at AA-/Stable, supported by strong viability ratings of aa- and recent upgrades to their Government Support Ratings (GSRs).
“The banks have dominant domestic franchises, significant pricing power, and access to a deep pool of low-cost funding,” Fitch said. “Their diversified business models and consistent underwriting standards lead to stable profitability and asset quality.”
While profitability and asset quality are expected to have peaked, Fitch sees credit impairments remaining benign over the next 12–18 months.
It also expects the banks to maintain solid earnings despite the plateau in interest rates, thanks to diversified revenue streams and manageable credit costs.
Fitch recently upgraded the GSRs of all three banks to aa-, reflecting a strong capacity and willingness by the Singapore government to provide support if needed.
These ratings serve as a backstop for the banks’ IDRs and are among the highest globally for non-policy financial institutions.
Fitch noted that a downgrade in the banks’ Viability Ratings would only occur if there is a sharp deterioration in asset quality and earnings or a significant drop in capitalisation, making any near-term downgrade unlikely.
Business News Asia