SINGAPORE (Oct 29): Mitsubishi UFJ predicts Singapore banks’ asset quality will deteriorate in the coming quarters, but says it remains “comfortable” with the credit profiles of the three local banks.

Singapore’s three banks -- DBS Group, Oversea-Chinese Banking Corp. and United Overseas Bank -- have “strong capitalisation and robust risk management systems,” Mitsubishi says in a note after OCBC reports its third-quarter result.

The house notes that OCBC’s bad loans rose 28% on-quarter and 39% on-year to $1.86 billion, though from a very low base.

Non-performing loans ratio was up 18 basis points on quarter and 22 basis points on-year to 0.88%, it says.

OCBC’s core net profit, excluding one-time items, rose 7% in the third quarter, Mitsubishi says, though the reported net profit was down 27% following a one-off gain of $391 million last year.

OCBC is down 1% at $9.10, underperforming the local benchmark FTSE Straits Times Index's 0.5% decline.