Singapore' s 3 big banks can defend market share against fintech threats: Moody' s

The three largest banks by assets in Singapore will be able to defend their market share against fintech competitors, despite the rapidly growing threats to their bank business from these companies, Moody&rsquo s Investors Service said in a report on Monday.

DBS Bank, OCBC Bank and United Overseas Bank (UOB) have abundant financial resources to invest in technology, whereas startups are facing increasing competition for funding, said Simon Chen, a vice-president and senior analyst at the credit rating agency.

The banks " have been channeling cost savings from efficiency gains through digitalisation back into technology investments" , he added.

All three banks have led digitization efforts in South-east Asia, Moody&rsquo s pointed out.

 

Singapore Banks.                       Maybank Kim Eng

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Banks responding to weakness with rising buybacks

Singapore banks have been de-rated 12% since their peak in April. Profit-taking, slowing economic growth in Singapore and escalating US-China trade tensions were culprits, in our view. During this time, share buybacks have picked up steam. YTD, DBS and OCBC have bought back more shares and much earlier than last year. We believe this is an indicator of emerging value. Our scenario analysis suggests that NPLs would need to rise 35-80% from current levels to bump credit charges up to levels seen during the O& M crisis and  GFC. Against a backdrop where none of their operating markets appears heading for a recession, such a scenario is unlikely, in our view. The sector is trading at a 17% FY19E P/E discount to ASEAN banks despite offering 149bp higher dividend yields. BUY UOB and DBS.