DBS Bank Ltd.

The stable outlook on DBS reflects our expectation that the bank will maintain its high systemic importance in Singapore and solid financial footing over the next 18-24 months. We believe both positive and negative rating actions are unlikely over the next one to two years. The bank's SACP would need to decline by at least two notches for a downgrade. We may revise downward our assessment of DBS' SACP if the bank's financial profile deteriorates significantly, as indicated by a much higher NPL ratio or increased credit costs compared to our base-case assumptions. This is, however, an unlikely scenario given our expectations of improving macroeconomic and operating conditions in 2021. We could lower the ratings on the bank's hybrid securities

...DBS Bank Ltd. should continue to display strong metrics in the key geographies where it operates. The bank has a solid franchise and leading market position in Singapore, supported by an extensive branch franchise. It also has a proven management record, a strong focus on Greater China, and a meaningful presence in South and Southeast Asia. Economic strains related to COVID resurgence will likely weigh on DBS' exposure to emerging markets. However, we still expect the bank to maintain its strong fundamentals. DBS' reported nonperforming loan (NPL) ratio is likely to increase moderately in 2021. We forecast the bank's NPL ratio will peak at 2%-2.5% by end-2021, compared with 1.6% in 2020, before gradually improving to about 2% in 2022. This reflects the delayed recognition of bad loans that originated in 2020, but which were under relief measures that allowed borrowers to defer interest or principal payments or both. That said, DBS has already covered substantial ground in building up loan...

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