
Double whammy: Singapore’s banks pummeled with weak lending activity and rising NPLs
They won’t be matching their robust performance soon.
Singapore’s banks are facing double haymakers in the gut as a tepid loan growth is further aggravated by non-performing loans (NPLs).
According to BMI Research, as of the close of September NPL ratio was 0.9% for OCBC and 1.3% for UOB, both higher y-o-y, while at DBS is remained unchanged from Q314 at 0.9%.
Uncertainty clouds Singapore’s banks in 2016, due to the usual suspects--the regional economic environment and financial market volatility.
“Total loan growth is likely to remain tepid through the end of 2016, and we have downgraded our forecast for loan market growth to a single-digit of 5.0% for the year, down from 10.0% previously,” BMI Research said.
Meanwhile, banks are also likely to experience a rise in net interest margins over the coming quarters, as lending rates rise due to sluggish lending growth.
“We expect a more judicious credit process amid a tighter lending environment to lead to higher margins over the coming quarters. In sum, borrowers are likely to go elsewhere for the financing they require in 2016, and perhaps beyond,” BMI said.