SINGAPORE Singapore's DBS Group Holdings reported a 9% decline in quarterly profit and, like rival OCBC, booked higher provisions for bad loans, hobbled by debt payment woes in the city state's oil services sector.
The results underscored a subdued outlook for Singapore's lenders this year and the potential downside risk posed by the oilfield services industry to their earnings and share prices.
"We have been highlighting that these banks were trading at about 15% premium to trailing book value. I do not see the book value growing by 15% year on year in these circumstances," said Jefferies analyst Krishna Guha.
Fourth-quarter net profit at DBS, Southeast Asia's biggest bank by assets, came in at S$913m (US$643m), the lowest in two years, and below an average forecast of S$936m from six analysts polled by Reuters.
DBS' charges for bad loans during the quarter rose 87% to S$462m.
Full-year net profit fell 2%, although CEO Piyush Gupta noted in an earnings statement that full-year profit had climbed 10% before provisions.
Earlier this week, OCBC reported an 18% drop in quarterly profit to a three-year low and warned of more pain in the oil and gas-related industry.
S&P Global Ratings said in a report on Wednesday it expects growth will remain flat for Singapore's banks in 2017.
"Higher-than-expected provisioning costs represent the main downside risk to profitability," said credit analyst Ivan Tan.
In a further sign of pain in the offshore services sector, Ezra Holdings has warned it may have to take a US$170m writedown on a joint venture. This week it also said that a creditor of a business owned by the venture had filed a court application requesting that the JV's subsidiary be wound up.
DBS's net interest margin fell 13bp to 1.71% as Singapore-dollar interest rates were lower compared to a year ago.
DBS expects mid-single digit growth in loan and income in 2017.
(Reporting by Anshuman Daga; Editing by Edwina Gibbs)