Singapore banks’ property loan-loss risks are limited, S&P says

Singapore banks

Singapore banks’ credit-loss risks are limited as housing remains affordable, borrowers can repay the loans and the government is taking steps to cool the market, Standard & Poor’s Ratings Services said.

The assessment is valid even if a property asset bubble forms in the city-state, S&P said in a report today. S&P said Singapore banks have begun to raise mortgage rates, limiting returns from property investments.

“This in turn helps reduce the likelihood of a speculative bubble and limit the risk of credit loss for banks,” Ivan Tan, an S&P credit analyst, said in the report.

Mortgages represent about 25% of loan portfolios for Singapore’s banks, making them the single largest industry risk, S&P said. The island-state’s three local banks are DBS Group Holdings, Oversea-Chinese Banking Corp. and United Overseas Bank.

Singapore’s private home prices surpassed the previous all- time peak achieved in 1996, after rising 5.2% in the second quarter and 5.6% in the first three months of the year, according to the Urban Redevelopment Authority.