Check out this downward trend in DBS' performance

Its creditworthiness is threatened, warns Moody's.

Moody's explained:

DBS remains a very strong credit with its B/aa3 standalone rating, among the highest assigned to any financial institution globally. This rating is driven by the bank's leading domestic franchise and strong balance sheet, including healthy asset quality, ample liquidity particularly in SGD, and relatively consistent earnings. In particular, the bank has impressive capital strength by global standards, with a large capacity to absorb loss even under Moody's highly adverse stress scenario.

In addition, Moody's assesses the likelihood of systemic support for DBS in the event of a crisis to be very high, based on its significance as the largest domestic bank in the country. As such, the GLC deposit rating of Aa1 benefits from 2 notches of uplift from the aa3 standalone rating.

However, DBS' changing risk profile in recent years may be indicating an increased risk tolerance that could make the bank's credit profile inconsistent with its high standalone rating over time. By definition, Moody's Aa ratings imply a very high certainty of outcome and, as such, are sensitive to relatively small increases in risk.

The negative outlook, therefore, incorporates some concerning trends in DBS' recent performance which may threaten its creditworthiness: DBS' increased appetite for regional expansion and rapid growth and -- to some extent-- its tightening funding profile, particularly in foreign currency.

More particularly, DBS' credit profile continues to evolve with the changing geographic mix of its business. The proportion from regional Asian markets is rising, in line with its long-term strategy to generate more income from these sources. While Moody's acknowledges the benefits of diversification, the bank is growing its exposure to high growth emerging markets that do carry higher risks. Furthermore, its expansion ambitions appear to be greater than those of the other Singapore banks.

Notwithstanding the fact that recent rapid growth was due to opportunities opened up by the retreat of European banks in Asia, and largely in trade finance, most of this growth was in USD, thereby pushing DBS' USD loan to deposit ratio (LDR) well above the 100% level for the past two and half years. Although the high USD LDR is partially mitigated by DBS raising foreign currency funds in the wholesale markets, there is little scope at this rating level for any funding or refinancing uncertainty in the event of a global liquidity crunch.