Economic fallout hits on Singapore banks' outlooks: Fitch

Impaired loan ratios are expected to more than double from end-2019 levels.

The economic fallout resulting from the ongoing coronavirus pandemic will further weaken Singapore banks’ key financial metrics, according to Fitch Ratings.

All three major Singapore banks face a negative outlook, with Fitch warning of a ratings downgrade.

Impaired-loan ratios are expected to more than double from end-2019 levels, and earnings to fall by around one-third.

Profits are expected to fall through thinner margins, higher credit costs, and lower credit growth.

Further, should these metrics deteriorate by more than Fitch’s base case, these may be sufficient to result in rating downgrades, the ratings agency said in a media note.

Capital is also under pressure from lower profit retention as well as higher-than-expected credit migration.

“Capital scores are likely to be lowered should the banks sustain common equity Tier 1 (CET1) ratios well below 14% without a credible plan to rebuild them to around 14% within the next couple of years,” Fitch added.

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