MARKETS, RETAIL BANKING | Staff Reporter, Singapore

Singapore's banking system to recover in two years: S&P

Even though it’ll be amongst the first to improve, recovery will still take until end-2022.

Whilst Singapore’s banking system is expected to be amongst the first to improve from the pandemic’s impact, recovery to pre-COVID-19 levels is expected to take two years, according to S&P Global Rating’s latest report.

The Lion City is amongst the banking jurisdictions listed as less-affected by the pandemic, alongside China, Canada, Singapore, Hong Kong, South Korea, and Saudi Arabia.

However, recovery for these markets will unlikely come before end-2022, S&P said.

"Risks remain firmly on the downside for these banking jurisdictions, in our view," said S&P Global Ratings credit analyst Gavin Gunning.

“We have already negatively revised the economic or industry trends underpinning the financial strength of many banking jurisdictions globally. This trend should persist. Further, we have seen negative rating momentum affecting financial institutions in most major banking jurisdictions, indicating that downside risks are to the fore,” he added.

The credit rating firm has taken 335 negative rating actions globally since the outbreak began, on the back of the COVID-19 and the oil price shock of 2020 taking a heavy toll on global banks.

Gunning further anticipates that it will be difficult for the financial strength ratings on financial institutions to return to pre-crisis levels.

“We don't expect the world's largest banking sectors, including more than half of G20's, to recover to pre-COVID-19 levels until 2023, or beyond,” he said.

In 2019, credit losses were near historical lows in almost all the higher-income countries in Asia-Pacific. But the advent of the coronavirus pandemic has reversed their fortunes. S&P now estimates that the COVID-19 shock to these economies will drive a multifold increase in credit losses, although economic recovery in the subsequent period should ease the credit losses, in our view.

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