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Singapore banks likely to report profit slump amid oil sector stress

Singapore banks likely to report profit slump amid oil sector stress

SINGAPORE: DBS Group Holdings and smaller rival United Overseas Bank (UOB) are set to report their lowest quarterly profit in at least two years, hurt by bad loan provisions for a battered oil services sector, a survey has shown.

Nearly a dozen Singapore-listed firms in the offshore services sector have sought to restructure their bonds and loans over the past two years to stay afloat, hit by a slump in orders as global oil prices remain low by historical standards. Stress in the sector, highlighted by Swiber Holdings’ decision last year to restructure under judicial management, does not appear to have abated.

Ezra Holdings this month flagged it may have to take a US$170 million (S$242 million) write-down on a subsea services joint venture.

All three of Singapore’s listed banks reported increases in third-quarter charges for soured loans, with DBS in particular doubling its charge to S$436 million.

“To a certain extent, the credibility of the managements is on the line as well when they say there are sufficient provisions being provided for, and we will see whether (or not) this is the case,” said Christopher Wong, senior investment manager at Aberdeen Asset Management Asia, which owns shares in the three banks. Slowing loan growth is also clouding prospects for the lenders.

DBS, South-east Asia’s biggest bank, is expected to show a 6.6 per cent fourth-quarter net profit decline to S$936 million, its weakest performance since the quarter to December 2014, according to the average estimate of six analysts polled by Reuters.

Singapore’s second-biggest lender OCBC is set to report a 10.8 per cent fall in fourth-quarter net profit to S$856 million, its lowest level in three quarters, while profit at UOB is set to drop 7.4 per cent to S$730 million, the lowest in more than three years.

While some analysts see the banks as well provisioned, CIMB analyst Jessalynn Chen said the market had not fully factored in asset quality concerns.

Some specific provisions were low at under 20 per cent as the loans were collateralised by vessels and other assets, but that might not be sufficient, she said.

 

OCBC is scheduled to report earnings on Feb 14, DBS on Feb 16 and UOB on Feb 17.