S&P: Capital Buffer for Singapore Banks to Weather Coronavirus
Banks in Singapore are undoubtedly not immune to the coronavirus-linked headwinds but an S&P report said it had «good capital buffers» to stay resilient.
According to the rating agency, Singapore banks are facing «near-term headwinds from a position of strength» given consistent efforts in recent history to strengthen their balance sheets to create «good capital buffers».
«We estimate that the transport and general commercial sectors respectively account for about 4 percent and 10 percent of Singapore's domestic loans,» S&P said. «This is meaningful exposure, but we believe the impact on banks in the short term will be manageable, given their healthy profit levels and financial strength.»
In addition, it also expects the city-state’s government to provide «extraordinary intervention to systemically important banks» in the event that of a prolonged coronavirus outbreak. Local authorities have intact already said it would provide targeted support to the most affected sectors, namely transport and tourism.
Prolonged Outbreak
Although Singapore may be able to withstand further pressure, a prolonged outbreak will nonetheless take its toll on the economy especially given that the Chinese for one-fifth of all visitors. According to S&P, such a scenario would lead to job losses in the tourism and general commercial sectors which will consequently spiral into higher repayment delinquencies for credit cards and, to a lesser extent, residential mortgages.
«The outbreak will drag on Singapore's business and consumer confidence, depressing credit demand,» said Ivan Tan, a credit analyst with S&P Global Ratings.
