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
