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PUBLISHED: Feb 16, 2017 8:43am

Oil woes drag down Singapore bank profits

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Source:
Reuters

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SINGAPORE, 16 Feb 2017:

DBS Group Holdings posted a 9% decline in quarterly profit and, like rival OCBC, booked higher provisions for bad loans – underscoring debt payment stress among firms in the city-state’s oil services sector.

In what has become a test for Singapore’s banks long lauded for their conservative lending standards, many firms in the city state’s oilfield services industry are struggling to pay debt – hit by weak oil prices and charter rates as well as delays to projects.

Net profit at DBS, Southeast Asia’s biggest bank by assets, came in at S$913 million in the three months ended December – the lowest in two years, and versus S$1.0 billion a year earlier. This was below an average forecast of S$936 million from six analysts polled by Reuters.

The bank said charges for bad loans rose 87% to S$462 million from S$247 million a year earlier.

DBS’s net interest margin, a key gauge of profitability, fell 13 basis points to 1.71% as Singapore-dollar interest rates were lower compared to a year ago.

It expects mid-single digit growth in loan and income in 2017.

In a further sign of pain in the offshore services sector, Ezra Holdings Ltd has warned it may have to take a US$170 million writedown on a joint venture.

This week it also said that a creditor of a business owned the venture had filed a court application requesting that the JV’s subsidiary be wound up.

On Tuesday, OCBC reported an 18% drop in quarterly net profit to a three-year low.

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