Singapore's DBS Bank Ltd. and Thailand's Siam Commercial Bank PCL's push for digital transformation is credit positive for the two lenders, Moody's said May 22.

The banks' strategies will help improve efficiency and protect their competitiveness against technology companies entering the financial services sector, said Alka Anbarasu, a vice president and senior credit officer at Moody's.

The rating agency said that while upfront investments in digitization have increased the cost bases of the two banks, these efforts will benefit the lenders with efficiency improvements over the next two to three years.

Moody's added, however, that a key risk for the two banks is that the change in customer preferences may be slower than their pace of digitization, leading to insufficient revenue gains and cost saving to cover their investments.

The rating agency also believes data-analytics based lending carries a risk because the reliability of using algorithms for credit allocations is yet to be proven.

In addition, increased digitization can expose the banks to cyber risks, Moody's said.

Overall, the benefits of the banks' digitization efforts outweigh the risk as it will enable them to defend their leading positions in the financial service sector, as well as protect their profits and business models, Anbarasu said.

DBS Bank is a unit of DBS Group Holdings Ltd.