Banks face risk of rising credit costs as bad assets mount

Net new NPA formation for all three banks rose in Q2, higher than FY18 quarterly averages.

Banks in Singapore grapple with the risk of rising credit costs after net non-performing asset (NPA) formation rose across the board for the three local lenders in Q2, according to a report from CIMB.

Also read: Bad loans haunt Singapore banks as asset quality risks rise

New NPA formation hit S$286m for DBS in Q2, which is slightly higher compared to the FY18 quarterly average of S$274m. OCBC's quarterly figures hit S$390m compared to the quarterly average of S$304m in 9M18 and UOB recorded S$357m in net new NPAs largely stemming from a real estate exposure in the US, from the FY18 quarterly average of S$283m.

Also read: Singapore banks' bad loan ratio to hit 1.7% by 2020

"Whilst a lower interest rate environment may reduce repayment burdens for corporates and consumers alike, we keep watch on potential asset quality blips given the sustained slower growth environment," analyst Andrea Choong said in a report.

Following the Q2 spike in soured assets, DBS recorded 28bp credit costs in the quarter. "Going forward, the bank holds out for recoveries on its O&G portfolio but we are less optimistic," she said.

Choong also raises credit cost assumptions to 22bp for FY19 for OCBC amidst further provisioning risks. UOB faces a more conservative credit cost estimate of 19bp credit cost in FY19.

The people you want to reach are already in this room.

Every quarter, SBR lands on the desks of the founders, CFOs, and directors running Asia's most consequential companies. Every day, they open our newsletter and read our website. It's a room that took twenty years to build — and it's the one most of our partners are trying to get into.

The good news is that the door is open. We work with companies on thought leadership articles, sponsored content, industry summits across Southeast Asia, regional awards programmes, podcasts, and media placements in print and digital. The shape of the right partnership depends on what you're trying to do, which is why we'd rather start with a conversation than send a rate card.

If you have something this room should know about, tell us. We'll tell you honestly whether we can help, and how.

No rate cards until we understand the brief. It's a better use of everyone's time.

Book a meeting

| Or download the media kit (PDF)

240,000 senior readers quarterly in print Top 1,700 Singapore companies reached

7 markets across Southeast Asia