DBS Hong Kong to keep sound asset quality: Moody's

It is expected the bank will keep stable asset quality.

DBS Bank (Hong Kong) is expected to keep a sound asset quality in the next year and a half, Moody's said in a report.

However, potential risks from its exposure to real estate in Hong Kong and China remain to be in the market’s environment. 

The bank's impaired loan ratio increased slightly to 1.2% by the end of 2022 from 1.1% in 2021. 

However, the bank has shifted its lending focus towards large corporates with strong financial profiles, reducing credit risks compared to small- and medium-sized enterprises. 

Additionally, the bank has a robust impaired loan coverage ratio of 99% by the end of 2022.

ALSO READ: DBS upskills sustainable financing knowledge of 1,600 relationship managers

Moody’s added DBS Bank (Hong Kong) will continue to maintain a strong capital position, benefiting from internal capital generation and moderate dividends. 

The bank's dividend payout ratio for 2022 was 23%, and it reported a Common Equity Tier 1 (CET1) ratio of 17.3% as of March 31, 2023.

Further, Moody's anticipates the bank's profitability to remain favourable in 2023, supported by growth in net interest income and manageable credit impairment charges. 

The reopening of borders with mainland China is expected to boost the bank's insurance products and wealth management sales, contributing to fee and commission income.