The benchmark Straits Times Index was down 0.55% to 3,155.54 at 5PM. — Bloomberg
SINGAPORE: Local bank stocks slumped when the market opened yesterday morning amid fears of wider financial contagion globally from the crisis engulfing Switzerland’s second-biggest bank and a string of US bank failures.
The battering comes after Credit Suisse sank as much as 30% on Wednesday after its largest shareholder, Saudi National Bank, ruled out investing any more in the bank on regulatory grounds.
The cost of insuring the bank’s bonds against default for one year surged to levels not seen for big international banks since the 2008 financial crisis.
However, yesterday afternoon, Credit Suisse shares bounced back, soaring by at least 30% in pre-market trading after the bank secured a 50 billion Swiss franc (RM243bil) lifeline from the Swiss National Bank.
Asian stock markets pared losses but were still in the red, with the benchmark Straits Times Index down 0.55% to 3,155.54 at 5PM.
Local bank stocks also trimmed their losses, which earlier hit over 1%. DBS was down 1.27% at S$32.55 (RM109), while OCBC was 0.98% lower at S$12.15 (RM41) and UOB slipped 0.71% to S$28 (RM94).
Financial markets globally have been roiled by the collapse of US mid-sized lender Silicon Valley Bank (SVB) and the closure of Signature Bank in New York state over the past week.
US regulators had to step in and provide guarantees that all depositors from SVB and Signature Bank would be repaid in full. Up to US$25bil (RM113bil) was also made available to fund a new lending programme allowing one-year loans to banks under easier terms.
Crypto-focused lender Silvergate Bank announced earlier last week that it planned to wind down and voluntarily liquidate its operations.
Kelvin Tay, chief investment officer for Asia-Pacific at UBS, said markets are clearly struggling with three inter-related but different issues – bank solvency, liquidity and profitability.
“Bank solvency fears are clearly overdone as most banks, including European banks, have strong liquidity positions and depositors remain well-protected.
“But a number of individual banks may require central bank liquidity support if funding conditions remain challenging for an extended period of time, hence the panic over Credit Suisse when its biggest stakeholder ruled out further support,” he said.
Phillip Securities Research analyst Glenn Thum said Singapore banks and Credit Suisse have quite different customer bases – Credit Suisse’s customers are primarily wealthy clients and businesses, while Singapore banks’ customers are mainly everyday savers and small and medium-sized companies.
As such, “the overall risk and exposure to Singapore banks is limited,” he said.
“With that being said, the recent collapses and news would impact the overall market, and there might be a further slowdown in loan growth, which might affect the growth of Singapore banks.”
Earlier this week, the Monetary Authority of Singapore (MAS) said local banks have “insignificant exposures” to the failed US banks and that the banking system here remains sound and resilient despite heightened volatility in global financial markets.
“Banks in Singapore are well-capitalised and conduct regular stress tests. Their liquidity positions are healthy, underpinned by a stable and diversified funding base. These factors will allow them to weather potential stresses from global financial developments,” MAS said. — The Straits Times/ANN
