Singapore banks’ significant exposure to the city-state’s property sector does not present a systemic risk, says IIFL Securities.

The house notes the proportion of property loans to overall loans for Singapore banks has doubled to 51% as of September this year from 24% in 1991, but more than 70% of housing loans are used for owner-occupied properties, which have a lower risk profile.

It says housing loans with negative equity (when a property is worth less than the outstanding balance on its loan) accounted for less than 1% of outstanding mortgages as of September vs a 3% peak in September 2009.

It adds, the non-performing loan ratio of loans to developers is below 1%, largely due to the recovery of the property market and the improving financial health of developers.

It rates OCBC (O39.SG) and DBS (D05.SG) at Buy with respective targets of $11.10 and $17.30, and UOB (U11.SG) at Add with a $21.50 target.