Euromoney, March 2017
February brought the annual results announcements of Singapore’s three banks, and they all followed a common theme: exposures to oil and gas service businesses are coming back to haunt them and, for two of them at least, wealth management is the future.
First out of the blocks was OCBC, which reported an 11% drop in net profit year-on-year of S$3.47 billion ($2.45 billion). With it came news that the non-performing loans ratio has more than doubled since March 2015, from 0.6% to 1.3%. Almost all of that is the result of the oil and gas support sector, which accounts for 0.61 percentage points of the 1.3%. It was negligible less than two years ago.
Two days later, it was DBS’s turn. The bank’s annual net profit, at S$4.24 billion, was down 2% on the previous year. Here, NPLs have risen from 0.9% a year ago to 1.4% today and allowances have doubled in a year to S$1.43 billion; again, oil and gas support services were the culprit.
The day after that came UOB. Its S$3.1 billion profit was down 3.5% for the year. NPLs grew from 1.4% to 1.5% over the year, although at least they were better than the previous quarter. Specific allowance on loans more than doubled to S$969 million – again, mainly due to oil, gas and shipping.
This did not come as a great surprise. The sector’s troubles were illustrated back in August when Swiber, a marine engineering company listed in Singapore, was placed under a rescue plan to be supervised by the country’s courts after defaulting on a coupon payment. All three Singaporean banks are large lenders to the country’s oil and gas services sector.
The problem is that nothing seems to be improving and there is little reason to expect that it will do so any time soon
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