FINANCIAL SERVICES | Staff Reporter, Singapore

How much worse can DBS's O&G woes get?

The bank's NPL ratio rose 1.4% in Q4.

It appears that the worst for oil & gas is not over after all for DBS Group, according to a report from CIMB.

The report noted that the bank's non-perfoming loan ratio crept up 1.4% in the past quarter as more O&G loans were classified. Of its $5.5b exposure to non-state owned OSV companies, $2.6b is to five chunky names, of which two are now in NPAs. The remaining $2.9b exposure to 90 names now has half the portfolio showing weakness, up from a third previously.

"Three of the 90 names became NPLs in 4Q, bringing the total to six names. Two-thirds of the vessels are still being utilised. NPL ratio for OSV segment was 21%,"A CIMB explained.

Here's more from the brokerage firm:

Of the $3.5b in new NPA formation in 2016, half were from O&G: $721m for Swiber, $800m for two large names and $200m for six smaller exposures. Another $1.25b of smaller O&G loans looks weak but has not turned into NPLs, and may face problems amid falling charter rates and contract terms in the absence of new E&P spending. While DBS shared three anecdotes where it sold vessels above the marked down collateral value, larger purpose-built vessels may be harder to sell or need steeper discounts.


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