CIMB predicts 15-20bp NPL increase for DBS, OCBC, UOB

Credit costs will increase 8% in 2013.

According to CIMB, loan allowances stayed low in 2012 as there were hardly any signs of bad debt.

NPL ratio has been on the downtrend for DBS and held stable for OCBC. Over the year, only UOB had an increase in NPL ratio in 3Q12 due to a problematic transport-related account, but even that has come off in 4Q12.

Here's more from CIMB:

DBS and UOB continued to pad up provisions even as NPL ratios declined generally. Provisioning coverage is now 142% for DBS and OCBC (2011: DBS – 126%; OCBC – 107%).

UOB’s provisioning coverage fell from 136% in 2011 to 124% in 2012 due to the aforementioned. Credit costs for UOB is likely to be larger compared to peers in the coming quarters as it tries to normalise its provisioning coverage to industry norm.

We maintain our view that NPLs will not spike in 2013. The key challenge for corporates today is slowing topline growth, not balance sheet issues. Having said that, Eurozone woes and the sequestration in the US is likely to have an impact on the global economy and could pose risks to our assumptions.

Nonetheless, corporates are cashed-up and have reined in expansion plans, the LTVs on the banks’ mortgage book are in the 50-60% range and the recent cooling measures should help control asset quality.

While SMEs in Singapore could face cost pressures as foreign labour tightens and some bankruptcies are inevitable, this should not contribute to an outsized spike in NPLs for the Singapore banks.

Nevertheless, we think that the current low levels of credit costs is likely to increase in coming quarters as provisioning normalises. We are pencilling in 15-20bp increase in NPL for all three banks. We expect credit costs to increase around 8% in 2013.

Follow the link for more news on

OCBC Bank

If you've been wondering whether SBR could work for your company — yes, probably.

A lot of the companies we partner with started as readers. They'd been following our coverage for a while, saw their own customers and competitors in it, and eventually asked the obvious question: could we do something with you? The answer is usually yes. The shape of it depends on what you're trying to do.

The options are broader than most people assume — thought leadership articles, sponsored content, industry summits across Southeast Asia, regional awards programmes, podcasts, and media placements in print and digital. Some partners use one channel; most use a mix. We figure out the right combination by starting with your brief, not with our rate card.

So if the question has been on your mind, here's the easy way to ask it.

We'll tell you honestly whether we can help, and how. 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