Singapore banks stuck in a ditch as oil sorrows mount

They will soon be bombarded with rising defaults.

It’s certainly an unfortunate time to be significantly exposed to the oil and gas sector, and such is the case of Singapore’s banks which are struggling with depressed oil prices.

According to RHB Research, Singapore banks’ exposure to the O&G sector is at $22.0b for DBS, $12.8b for Oversea-Chinese Banking Corp (OCBC) and $10.2b for United Overseas Bank (UOB).

“SG Banks have declined 11% YTD (as at 14 Jan) in USD terms, the worst performer among ASEAN peers,” RHB Research said.

Additionally, bad loans are expected to rise for Singapore banks, but will remain manageable, RHB Research said.

“Most oil & gas customers are said to have a decent balance sheet to help them weather the challenging times,” RHB Research added.
RHB Research adds that the bad loan backdrop hounding Singapore’s banks also mimic scenarios during the global financial crisis (GFC).

“DBS’ NPLs came mainly from the financial services sector with NPL ratio at 10.4%. For OCBC and UOB, the problem area was the manufacturing sector with NPL ratios reaching a high of 6.9% and 7.7% respectively,” RHB Research said.