CIMB refutes Moody's downgrade of Singapore banks

CIMB believes there is nothing to worry about.

Moody’s downgraded its outlook for Singapore banks from stable to neutral yesterday on the belief that the increased likelihood of tightening US monetary policy is likely to trigger a turning point in the credit cycle and lead to worsening NPL ratios and higher credit costs.

MAS responded with a statement that Singapore banks have undergone stress tests and have “adequate buffers” to cope
with higher interest rates.

Here's what CIMB thinks:

While we agree with Moody’s downgrade on the basis of a weaker credit environment, we believe that the Singapore banking system is relatively resilient and we should notbe overly concerned.

During two major recessions in the past 16 years, Singapore’s domestic NPLs did not really inflate.

We believe that the same will happen this time round.

Domestic mortgages have not contributed significantly to NPLs in the last two decades and we believe that it will not be a big contributor this time either.