Singapore Banks Feeling the Pain of Low Oil Prices

Local banks are feeling the “oil pressure” on their profits, as they face mounting provisions for non-performing loans in the energy sector suffering from a price slump.

The city-state’s largest lender by assets DBS Group Holdings announced on Monday that its net profit dropped 6% to 1.05 billion Singapore dollars ($780 million) in the quarter ended in June from a year ago. While interest income and total loans expanded, specific allowances to cover the exposure to the financially troubled local offshore construction company Swiber Holdings swelled and added pressure to the bank’s bottomline.

Specific allowances booked during the quarter surged more than 2.5 times to S$366 million from a year ago. Singapore-listed Swiber is in the process of judicial management after it reversed a July decision to wind up.

DBS CEO Piyush Gupta on Monday pointed to the speed at which Swiber fell into deep financial trouble. “[The company] imploded in six weeks,” said Gupta. He said there was “no indication of stress” and defended the bank’s decision to extend bridging loans to the company in June and July.

via Nikkei

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency
trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza