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Moody's lowers outlook on large Singapore banking groups to negative

Moody's said March 31 that it lowered the outlook on fourSingapore financial institutions — DBS Bank Ltd., DBS Group Holdings Ltd., andUnited Overseas BankLtd. — to negative from stable.

The rating agency also lowered the outlook on OCBC unitBank of Singapore Ltd.to negative from stable.

Moody's affirmed DBS Group's long-term local- and foreign-currencyissuer rating at Aa2 and its short-term local- and foreign-currency issuerrating at P-1. The long- and short-term local- and foreign-currency bankdeposit ratings of each of DBS Bank, United Overseas Bank and OCBC wereaffirmed at Aa1 and P-1, respectively.

The rating agency said it expects a more challengingoperating environment for banks in Singapore in 2016 that will pressure thebanks' asset quality and profitability. A looming risk for Singapore banks'asset quality is their large exposure to oil and gas borrowers.Singapore banks' exposure to oil and gas services firms range from 13% to 24%of their common equity Tier 1 capital.

Despite the headwinds, Singapore banks maintain very strongbuffers in terms of capital, loan loss provisions and pre-provision income,Moody's noted.

The affected banks' ratings could be lowered if theirfinancial fundamentals deteriorate significantly. The outlooks could be raisedto stable if macroeconomic conditions in Singapore and the region improve.

Meanwhile, Moody's affirmed Bank of Singapore's local- andforeign-currency deposit ratings and its local- and foreign-currency rating ofAa1/P-1.

The bank's ratings could be downgraded if parent OCBC'sadjusted baseline credit assessment is lowered or if the bank's fundamentalsweaken. Moody's does not expect any upward pressure on the bank's ratings.However, the outlook could be raised to stable if the macroeconomic conditionsin Singapore improve and the outlook on OCBC is revised back to stable.