DBS wor­ries about SGD22b oil and gas ex­po­sure

The Pak Banker - - COMPANIES/BOSS -

Oil and gas ex­po­sure has been caus­ing much headache to Sin­ga­pore's big­gest banks. But of the three banks, DBS seems to be the most con­fi­dent of its O&G ex­po­sure.

An­a­lysts note that there will be min­i­mal spe­cific pro­vi­sions (SGD150m-200m) for this port­fo­lio this year as its cus­tomers are mainly sta­te­owned and has strong cash po­si­tion.

Credit cost of SGD743m was 15 per­cent below our 29bp fore­cast for 2015, but NPA cov­er­age fell to 148 per­cent from 161 per­cent in 4Q15. The NPL ra­tio was steady at 0.9 per­cent in 4Q15, flat q-q, sup­ported by SGD211m NPA up­grades and re­cov­er­ies in 4Q15.

DBS's to­tal com­modi­ties ex­po­sure of SGD34b was un­changed in 4Q15. DBS did not see stress for its O&G pro­duc­ers, traders and pro­ces­sors, to­talling SGD13b in 4Q15.

The NPL ra­tio for its SGD9b O&G sup­port ser­vices ex­po­sure was 1.3 per­cent in Dec 2015. DBS ex­pects min­i­mal spe­cific pro­vi­sions (SP) for this port­fo­lio in 2016, due to the strong cash po­si­tion and sta­te­owned na­ture of its cus­tomers.

Even with a USD20b per bar­rel stress test as­sump­tion, DBS doesn't ex­pect ad­di­tional SP for its O&G ex­po­sure in 2016. The NPL ra­tio for its SGD12b non O&G com­modi­ties ex­po­sure was 1.7 per­cent in Dec 2015. DBS bud­gets 25 per­cent de­te­ri­o­ra­tion in SP (credit cost) or an ad­di­tional SGD150m for 2016 vs 2015.

DBS has SGD22b of ex­po­sure to O&G of which SGD17b are loans. For O&G, man­age­ment ex­pects no NPLs from the Pro­duc­ers, Traders and Pro­ces­sors seg­ments.

Within the seg­ment ' other' are SGD9b that in­cludes: 1) ship­yards in Sin­ga­pore; and 2) 10-12 key names in the O&G space where av­er­age ex­po­sure is SGD500-600m. Such ex­po­sure is 80 per­cent se­cured with a LTV ra­tio of 50-60 per­cent based on the lat­est appraisal value.

Man­age­ment stated that even if lower oil prices of USD20 per bar­rel per­sist into 2017/18, to­tal pro­vi­sions will not ex­ceed SGD200m. DBS' oil & gas ex­po­sure amounted to SGD22bn as at end-Dec 2015.

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