Moody's affirms DBS with stable outlooksGlobal Credit Research

$DBS GROUP HOLDINGS LTD(D05.SI)$

Rating Action: Moody's affirms all ratings and assessments of DBS Bank and DBS Group with stable outlooksGlobal Credit Research - 09 Feb 2022Singapore, February 09, 2022 -- Moody's Investors Service has today affirmed the long-term Aa1 bank deposits and senior unsecured debt ratings of DBS Bank Ltd. (DBS), and long-term Aa2 issuer ratings of DBS Group Holdings Ltd (DBSH). Moody's has also affirmed the ratings of subordinate debt instruments and preferred securities issued by DBS and DBSH, and affirmed DBS's baseline credit assessment (BCA) and adjusted BCA of a1.The outlooks on DBS and DBSH remain stable. Moody's expects that DBS will maintain very strong solvency and liquidity in the next 12-18 months.The full list of affirmed ratings is provided at the end of the press-release.RATINGS RATIONALEMoody's has affirmed the Aa1 ratings of DBS because the bank's very strong credit profile will be supported by the recovering economic environment in Singapore and Asia. Lower credit costs coupled with rising short-term interest rates and long-term yields will boost the bank's profitability in 2022 and 2023. Although the pandemic-related economic disruptions will persist in 2022, DBS has strong core capital and credit reserves to mitigate unexpected credit and market risks.Moody's continues to incorporate a very high probability of support from the Government of Singapore (Aaa stable) given the bank's high systemic importance, which leads to three notches of uplift from the bank's a1 BCA.Moody's expects a very small increase in the problem loans ratio for DBS in 2022, from 1.5% as of 30 September 2021. The bank maintained a strong problem assets coverage ratio of 107% as of the same date. Loans under relief made up less than 1% of gross loans, below the average for rated Singaporean banks.Return on assets will improve in 2022 to above 1% as US and Singapore interest rates increase, and credit costs decrease to pre-pandemic level.Capital will remain at a strong level, despite a modest decrease. The tangible common equity will decline to around 13.5% of risk weighted assets in 2022, from around 14.5% as of 30 September 2021, because of a planned acquisition in Taiwan, China (Aa3 positive) and the higher regulatory capital requirement imposed by the Monetary Authority of Singapore for outages in its digital banking services.Funding and liquidity will remain strong at DBS. The share of liquid assets in total assets will remain at around 30% in 2022.DBS GROUP RATINGS AFFIRMEDMoody's has affirmed the Aa2 issuer ratings of DBSH, the holding company of DBS. DBSH's issuer ratings reflect the same probability of public support as for DBS, however the holding company's issuer ratings are one notch lower compared to DBS because Moody's assumes a higher loss given failure for holding company senior unsecured creditors, due to their structural subordination to the creditors of DBS. DBSH maintains an adequate double leverage ratio and benefits from ongoing access to liquidity and capital from DBS.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSFACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGSDBS's ratings are among the highest assigned to any financial institution globally, and upward pressure on the senior debt and deposits ratings is unlikely. However, any improvement in the macroeconomic conditions in Singapore or the region, as well as in the bank's financial metrics, would be credit positive for the bank's BCA.FACTORS THAT COULD LEAD TO AN DOWNGRADE OF THE RATINGSDBS's BCA could be downgraded if its core capital ratio is materially eroded due to credit losses, and the capital ratio (TCE/RWA) decreases to below 13%. A lower BCA will likely lead to lower deposits and debt ratings. DBSH's ratings will be downgraded if DBS Bank's ratings are downgraded.The principal methodology used in these ratings was Banks Methodology published in July 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1269625. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.