DBS Bank Ltd.

The stable outlook on DBS Bank Ltd. reflects our expectation that the bank will maintain its high systemic importance in Singapore and keep its 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 stand-alone credit profile (SACP) would need to decline by at least two notches for a downgrade. We may revise downward our assessment of the SACP if the bank's financial profile deteriorates significantly. The latter could be indicated by a much higher NPL ratio or increased credit costs than our base-case assumptions. This is, however, an unlikely scenario given our expectations of manageable macroeconomic and operating conditions. We could lower

...DBS Bank Ltd.'s interest margins will likely peak in 2023. Net interest margins (NIMs) look set to peak this year after consecutive quarters of rising asset yields throughout 2022. DBS is well-positioned to take advantage of this; the majority of its floating rate loans have quickly repriced upward, while its balance sheet remains flushed with liquidity and low-cost customer deposits. We believe the tightening cycle is nearing its end, and therefore we think NIM will peak at about 2.2% in 2023, before moderating to about 2% in 2024. Asset quality should remain resilient, with some manageable deterioration. We forecast DBS' nonperforming loan (NPL) ratio will be in the range of 1.2%-1.4% over the next two years. Reported NPL ratio was very low at just 1.1% in 2022. The realities of higher borrowing costs, coupled with still-elevated inflation, will register more prominently in 2023. This could result in some backsliding after last year's continued improvement in nonperforming loan (NPL)...

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