SINGAPORE Feb 10 Singapore's DBS Group Holdings
and smaller rival United Overseas Bank are
set to report their lowest quarterly profit in at least two
years, hurt by bad loans provisions for a battered oil services
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
decision last year to restructure under judicial
management, does not appear to have abated. Ezra Holdings Ltd
this month flagged it may have to take a $170 million
writedown on a subsea services joint venture.
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 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)