S’pore banks ‘as close to being safe as possible’

S’pore banks ‘as close to being safe as possible’ 

By Francis Chan 

BANKS across the United States and Europe are being rescued, merged or shut down but Singapore’s banks are still seen as rock solid in the wider community.
Market watchers told The Straits Times that the three banks here are well regulated, with one expert saying they were ‘as close to being safe as possible’.
They pointed out that the Monetary Authority of Singapore’s (MAS) rules demanding that banks here retain plenty of capital - expressed as the capital adequacy ratio (CAR) - are among the toughest in the world.

‘The thing that differentiates Singapore banks from US and European banks is that none of them is in trouble. There have been no bailouts and no mergers - that’s the major difference,’ said Daiwa Institute of Research analyst David Lum.

Kim Eng Securities analyst Pauline Lee said that the market selldown will affect bank shares, which can fall further. But there is no real loss of confidence in them, she added.

‘The general confidence level is still strong. That’s because the banks are backed by very strong asset quality, and their CAR is maintained at levels that are way above the regulatory requirement.’

A bank’s CAR typically reflects its level of stability, how efficient it is and how well its depositors are insulated if it suffers losses. International regulatory requirements of CAR typically measure two types of capital, called Tier 1 and Tier 2 capital.

In Singapore, the CAR requirements are 6 per cent for Tier 1 and 10 per cent for total CAR. International minimums are 4 per cent and 8 per cent respectively.

This simply means that as a precautionary measure, a bank must set aside six cents of Tier 1 capital for every $1 in loans or other assets it has.

DBS said its Tier 1 CAR is 10 per cent, UOB is at 11.3 per cent and OCBC, the highest, is at 15 per cent. In contrast, US financial giant Citigroup has a Tier 1 CAR of 8.7 per cent and a total CAR of 12.2 per cent.

But its locally incorporated subsidiary Citibank Singapore - which has to meet MAS’ rules - has a Tier 1 CAR of 15 per cent and a total CAR of 15.15 per cent.

Mr Lum noted that all three local banks have also recently shored up their capital base through recent preference share offerings.

DBS, Singapore’s biggest lender, started the capital raising with a $1.5 billion preference share offer in May. OCBC followed, collecting $1 billion in July and a further $1.5 billion in August. Last month, UOB raised $1.32 billion from its issue.

A recent report by credit agency Fitch Ratings said that the ratings of Singapore banks - or their likelihood of default - remained stable, despite the credit crunch.

Mr Ambreesh Srivastava, senior director of financial institutions at Fitch, put it down to a few factors.

First, that banks here have ready access to funds - unlike some Western banks. Fitch said that Singapore banks get their funding from a variety of sources, including retail deposits that pay relatively low rates.

Banks here also have low exposure to structured products - including toxic mortgage-related debts that have fallen dramatically in value - and strong solvency indicators.

So while analysts like CIMB’s Kenneth Ng have downgraded earnings estimates for banks here due to the global economic strife, he stills see banks going strong.

On Wednesday, share prices of the three banks fell to two-year lows on fears that collective rate cuts by central banks would not be enough to support an ailing global financial system.

But they recovered yesterday - DBS was up 2.3 per cent at $15.34, UOB rose 3.6 per cent to $15.94, with OCBC finishing strongest at $6.56, up 5 per cent.

‘With bank valuations at trough levels and banks offering liquidity to portfolios in these times, we believe they will continue to outperform till the end of the year,’ said Mr Ng.

Source : Straits Times - 10 Oct 2008

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Rate cuts fail to bring Asia-wide rally

Rate cuts fail to bring Asia-wide rally

 
By Goh Eng Yeow 
  
EFFORTS by Asian central banks to join their Western counterparts in a coordinated effort to cut interest rates failed to produce the regionwide rally many expected yesterday.
Markets in Singapore and Hong Kong both rebounded by over 3 per cent as investors responded to the moves to calm the global turmoil by snapping up battered banks and other blue chips.

But traders in Tokyo, Shanghai and Sydney stayed cautious, and adopted a wait-and-see attitude, which smothered attempts by their battered blue chips to make a comeback.

At least European markets caught the more optimistic mood, rising around 1 to 2 per cent each after sinking to five-year lows on Wednesday.

Market experts are sceptical that the credit crisis can be resolved simply by a series of interest rates cuts. For some, this is beginning to resemble the Sars crisis, when economies such as Singapore and Hong Kong almost came to a standstill.

‘For me, the biggest scare was the Sars crisis in 2003. Let’s hope that things work out more happily this time,’ said Phillip Securities managing director Loh Hoon Sun.

But the note sent out by private bank LGT reflected the anxiety of many: ‘Keep in mind that while lower rates help, it is fear and lack of trust that is ultimately hindering banks. Please do be patient and continue to stay in cash.’

Still, there were some bright spots.

An initial lack of European cooperation was blamed for triggering the stock market rout on Monday, so efforts by France, Belgium and Luxembourg to save troubled bank Dexia by allowing it to borrow with state guarantees were seen as a sign that countries were cooperating.

And a fall in the yen against the greenback and other regional currencies suggested that hedge funds might have stopped dumping regional stocks. The yen had soared over the past week, as funds repaid massive yen loans taken on huge bets over emerging market equities.

On Wall Street, the mood lightened with the Dow Jones Industrial Average opening 169 points higher, after closing down for the previous six sessions.

Traders there had shrugged off fears of a further selldown in financial stocks after the lifting of a temporary short-selling ban. This followed a report that the United States might use its US$700 billion bailout (S$1 trillion) fund to take stakes directly in banks to try to restore confidence to the global financial system.

That move would resemble a British plan to recapitalise its own battered banks by offering up to £50 billion (S$127 billion) to shore up their capital and another £250 billion guarantee to refinance their debts.

While there was no shortage of activity across the globe, the over-riding feeling, especially after the half-hearted stock market rallies, was that the relief would be only temporary.

In the money markets, simultaneous rates cuts failed to inspire banks to restart lending, even though their funding costs had become cheaper.

Instead of easing, the three-month US dollar London Interbank Offered Rate (Libor) - the rate at which banks lend to each other - rose 0.2 percentage point to 4.52 per cent.

Tiny Iceland’s slip down the road to bankruptcy raised more concerns. Yesterday, it nationalised its largest bank and suspended trading of its shares.

There were also fallouts in other markets from fears of a global recession. Crude oil prices skidded US$1.11 to a eight-month low of US$88.95 a barrel.

And South-east Asia is beginning to feel the credit crisis strains, after staying immune since last year.

Indonesia’s stock market was closed for a second day, after shares plunged by over 20 per cent since Monday.

And in Singapore, the fear is that cash-strapped China firms may start ‘falling like flies’, if the credit crunch squeezes their working capital. This followed the collapse of listed steel-coil maker Ferrochina after it failed to repay 706 million yuan (S$152 million) in loans and stopped factory operations in China.

‘At best, any rally will come in bits and pieces,’ said AmFrasers Securities’ Najeeb Jarhom, surveying the wreckage of the local market in the past two weeks.

 
Source : Straits Times - 10 Oct 2008

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7 Draycott Dr For Rent

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DESCRIPTION / DETAILS

Address: 7 Draycott Drive
Type of Development: Condominium
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District: 10
No. of Units:34
Year of Completion: 2000
Developer: Draycott Garden Pte Ltd
Unit sizes:
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Penthouse: 272 - 358 sq m

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