Moody’s Investors Service on Monday cut its ratings outlook on Singapore’s three banking groups to “negative” from “stable”, saying the global recession would hurt earnings and asset quality.
DBS Group, United Overseas Bank and Oversea-Chinese Banking Corp are currently rated “Aa1” for both long-term debt and deposits, equivalent to the AA-plus rating assigned by rivals Standard & Poor’s and Fitch Ratings.
“The negative outlooks of DBS, OCBC and UOB reflect the fact that the deepening global economic downturn could have a protracted impact on their asset quality and earnings,” Moody’s Vice President and Senior Analyst Christine Kuo said in a statement.
But Moody’s also said the three Singapore lenders had strong franchises and healthy credit profiles, and benefited from a “very high level of support” from the Singapore government.
“Consequently, even in a severe downside scenario, we would expect the banks’ financial strength ratings to remain above average and their debt and deposit ratings to be solidly positioned within the Aa-rating band,” Kuo said.
Singapore last week reported its economy contracted a record 11.5 percent from a year earlier in the first quarter and said gross domestic product could shrink as much as 9 percent for the whole of 2009.