Singapore banks' sour loans in focus as oil service sector stresses

Ezra Holdings

10/02/2017 04:19

By Anshuman Daga 
    SINGAPORE, Feb 10 (Reuters) - Singapore's DBS Group Holdings 
 DBSM.SI  and smaller rival United Overseas Bank  UOBH.SI  are 
set to report their lowest quarterly profit in at least two 
years, hurt by bad loans provisions for a battered oil services 
sector. 
    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 oil prices remain low by historical standards. 
    Stress in the sector, highlighted by Swiber Holdings 
 SWBR.SI  decision last year to restructure under judicial 
management, does not appear to have abated. Ezra Holdings Ltd 
 EZRA.SI  this month flagged it may have to take a $170 million 
writedown on a subsea services joint venture.  urn:newsml:reuters.com:*:nL4N1FN16V 
    All three of Singapore's listed banks reported increases in 
third-quarter charges for soured loans, with DBS in particular 
booking a doubling to S$436 million ($307 million). The extent 
of further provisions in the fourth quarter and the outlook for 
2017 will be key focus as the lenders report next week. 
    "To a certain extent, the credibility of managements' is on 
the line as well when they say there are sufficient provisions 
being provided for and we'll see whether this is the case," said 
Christopher Wong, senior investment manager at Aberdeen Asset 
Management Asia, which owns shares in the banks. 
    Slowing loan growth - now low single digit growth from 
double digit growth just two years ago - as China offshore loan 
demand and regional trade weakens - is also clouding prospects 
for the lenders. 
    DBS, Southeast Asia's biggest bank, is expected to show a 
6.6 percent 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. 
    No. 2 lender OCBC  OCBC.SI  is set to report a 10.8 percent 
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 
percent 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 percent as the 
loans were collateralised by vessels and other assets, but that 
might not be sufficient, she said. 
    "The problem is the valuation of the vessels could be 
written down, especially for companies with more specialised or 
purpose-built assets that are unable to find new orders to 
support cash flows," she added. 
    OCBC reports on Feb. 14, DBS on Feb 16. and UOB on Feb. 17. 
 ($1 = 1.4190 Singapore dollars) 
 
 (Reporting by Anshuman Daga; Editing by Edwina Gibbs) 
 ((anshuman.daga@tr.com; +65 64035676; Reuters Messaging: 
anshuman.daga.thomsonreuters.com@reuters.net)) 
 
Keywords: SINGAPORE BANKS/