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Euromoney, August 6 2020

The headline numbers were ugly in Singapore this morning.

At 8.30am, UOB chief executive Wee Ee Cheong explained why his bank’s first-half profit was down 30% year-on-year. Two hours later, Piyush Guptanarrated a 26% decline in the same metric at DBS. “This,” began the CEO, “was a tough quarter.”

The reasons are easily understood: the fact that the Covid-19 pandemic and associated lockdowns brought many of the Asian economies within which the two banks operate to a standstill in April and May, coupled with the central bank response to the pandemic.

Piyush Gupta,

“The full impact of the interest-rate cuts flowed through our entire book,” Gupta says. “It is costing us about 80 million bucks a month [Singapore dollars] and that will probably go up to 100 million bucks a month next year.

“It is obviously a big drag on income, compounded by the fact that in April and May there was a basic lockdown in most of the countries in which we operate.”

Reading the full impact on asset quality is rather difficult, because both banks – and OCBC, which reports tomorrow – have offered relief measures on much of their troubled lending, which means it doesn’t yet flow through into non-performing loan (NPL) numbers and it’s impossible to know to what extent it ever will.

UOB’s NPL ratio stands at 1.6%, DBS’s at 1.5%, in both cases flat on the previous quarter. In fact, the biggest provision at DBS by far is an oil and gas exposure from the first quarter that had nothing to do with Covid-19.

Read the full article here

Chris Wright
Chris Wright
Chris is a journalist specialising in business and financial journalism across Asia, Australia and the Middle East. He is Asia editor for Euromoney magazine and has written for publications including the Financial Times, Institutional Investor, Forbes, Asiamoney, the Australian Financial Review, Discovery Channel Magazine, Qantas: The Australian Way and BRW. He is the author of No More Worlds to Conquer, published by HarperCollins.

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