Singapore banks brace for hit from beleaguered oil, gas sector

Local banks' exposure to the sector is around 14%.

Banks' asset quality is expected to worsen in 3Q16, still driven by new non-performing asset (NPA) formation in the oil & gas sector, said CIMB.

As of 2Q16, CIMB estimates that OCBC led the banks in NPL recognition for the upstream oil & gas book at 15% NPL ratio, followed by UOB at 12% and DBS at 5%.

It expects a pickup in NPLs and provisions in 2H16 as more corporates requested to restructure their debt and faced difficulty in meeting coupon payments on their bonds. These include Perisai, Ausgroup, Swissco and Marco Polo Marine.

Together with Swiber, CIMB estimates that the total debt of these companies represent 14% of the three banks’ total exposure to the upstream oil & gas sector.

"We expect DBS to catch up with peers on NPL recognition for oil & gas in 2H16," it said.