- Oil shock related spikes in Singapore banks’ credit costs and NPLs have been steadily declining in the past 25-years.
Shock Absorber
- While the full impact of the current US-Iran shock is unknown, we believe the sector is in a strong position to manage downside risks.
- - Read this at SGinvestors.io -
Manageable asset quality impacts in recent oil shocks
- We analyse oil shocks in the past 25-years. The worst was 2003-08 when oil peaked at US$147/bbl from surging China/Emerging Market demand. This was followed by the Arab Spring 2010-12, COVID Rebound 2021-22 and Russia-Ukraine 2022-23.
- Credit costs were highest in 2003-08 with the sector peaking at 74bps, while NPLs reached 6.7%. However, for context, the 5-years prior to this shock, credit costs averaged 69bps. Subsequent shocks have seen credit costs coming in lower. They averaged 20-22bps in the past two shocks.
- - Read this at SGinvestors.io -
- Nearly S$1bn of support rolled out by the government last week also helps to ease energy costs pressures, especially for SMEs. This further reduces asset quality risks, in our view.
Strong capital buffers in a “Stress Case” scenario
- Read more at SGinvestors.io.
