Singapore’s three largest banks risk up to 18 percent of revenue in 2020 following the latest announcements for relief measures.
Following an announcement by the Monetary Authority of Singapore to provide relief to consumers and small businesses via deferred payments and other measures, a report by Jefferies signaled bigger hits to profits.
In the worst-case scenario, UOB could lose 18 percent of revenue followed by OCBC’s 16 percent and DBS’s 14 percent due to the new measures that could pressure banks to provide payment deferrals and rate cuts on mortgage and personal loans.
Earlier in March before the MAS’s announcement, DBS chief executive Piyush Gupta flagged a potential 1-2 percent revenue cut for the year – a modest prediction which the Singaporean lender’s institutional banking head Tan Su Shan followed up by calling a «moving target».
Lower Credit Costs
But the newly announced measures did not spell all bad news for Singapore’s lenders. Lower credit costs from easing is expected to help offset some of the losses incurred from delayed payment revenue or lost interest income.
«The package will certainly help mitigate cash flow strains for businesses and households, along with various fiscal and monetary measures,» said Jefferies analyst Krishna Guha. «Forecasting for banks becomes difficult; it is likely that the negative impact on revenue will have some offset from lower credit cost.»
