How badly will Singapore banks be hit if home prices slump 45%?

Profits could plunge as much as 24%.

According to Fitch Ratings, Singapore banks - DBS Group Holdings, Oversea-Chinese Banking Corp and United Overseas Bank Limited - are strong enough to withstand a downturn in the city-state's property market as severe as the 45% plunge in private-home prices triggered by the 1997-1998 Asian financial crisis.

Here's more from Fitch:

Fitch believes Singapore banks' housing-loan quality will be shielded by the banks' disciplined underwriting standards, and healthy loan-loss reserve coverage of 113% at end-June 2016. We believe Singapore's private-home prices will weaken further amid an influx of new homes, having declined 9.4% from their peak in September 2013; signs of an oversupplied market have emerged with vacancy rate of non-landed private homes rising to its 11-year high of 10.4%.

Our stressed-scenario analysis shows that as much as 24% could be shaved off banks' earnings, if property prices fell 45% in a year. Fitch's assumptions are harsh and include housing-impaired-loan ratio reaching a high of 5% (end-June 2016: 0.4%) and all defaulted housing loans have an 80% loan-to-value ratio. As a comparison, the average housing NPL ratio of the three Singapore banks reached a high of 4.3% when private-home prices fell 45% from peak to trough in the aftermath of the 1997-1998 Asian financial crisis.

Fitch believes the impact on banks would be cushioned by the property-cooling measures introduced between September 2009 and June 2013; a severe property price collapse could prompt the regulators into reversing some of these measures.

Fitch believes increased foreign home-ownership does not present a credible risk to the housing-loan quality of Singapore banks due to their cautious lending to this segment. Singapore's role as a global wealth-management hub also suggests some of these purchases are long-term investments, thus reducing the risk of capital exodus.