Singapore is in pole position to take off, since any economic recovery is likely to be closely tied with solving Covid-19. Of course economists remain cautious, as both developed and emerging economies grapple with second and third waves. Maybank Kim Eng expects GDP growth this year to rebound to 4.5%, near the lower end of the government’s 4–6% forecast range. Nonetheless, positive GDP growth is a reversal of the 5.8% contraction expected in 2020. Interestingly, GDP growth in 3Q2020 and 4Q2020 rebounded to 9.5% q-o-q and 2.1% q-o-q respectively.
The outlook for banks is closely tied to the outlook for the economy. DBS Group Holdings ticks a few boxes. For one, Singapore has been one of the most successful nations to curb the spread of Covid-19. Among the three local banks, DBS has the largest exposure to Singapore. In FY2019, Singapore contributed more than 70% to its net profit of $6.39 billion. This dipped to 60% for the nine months to Sept 30 due to DBS’s conservative provisioning policy.
The other two Singapore banks have a larger regional footprint than DBS. Oversea-Chinese Banking Corp is expanding its foothold in North Asia following the acquisition of Wing Hang Bank, and United Overseas Bank is increasingly viewed as an Asean bank.
