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Moody's raises outlook on Singaporean banking sector to stable

Moody's said it raised its outlook on Singapore's banking sector to stable from negative, citing stabilized commodity prices and improved growth conditions.

The stable outlook reflects the stable status of the banking system's operating environment, asset quality and capital, funding and liquidity, profitability and efficiency, and systemic support.

Moody's said May 31 that funding and liquidity would remain Singapore banks' major forte, with stable loan-to-deposit ratios below 100% for the three large banking groups, a low reliance on wholesale funding and a high proportion of liquid assets.

Eugene Tarzimanov, a vice president and senior credit officer at Moody's, said that while loan growth is expected to increase slightly, it would be sustained by the banking system's strong capital, funding and liquidity buffers. The agency, however, expects problem loan ratios to increase moderately due to lingering distress in some local business segments.

The rating agency added that government support for the three large banking groups in the city-state would remain high, reflecting their economic importance and the government's strong support capacity.

Meanwhile, the agency expects slightly higher interest rates in Singapore as a result of strict U.S. monetary policy.