Big three banks' $871.5m Hin Leong exposure adds to loan pressures

More than 17,000 mortgagees have applied to defer their mortgage payments.

The big three banks’ loan exposure to troubled oil and gas (O&G) trader Hin Leong further weighs on the banks’ loan troubles, as they face a rising tide of deferred payments and term loans, reports Jefferies Equity Research.

DBS, OCBC, and UOB collectively have more than $871.5m (US$610) exposure to troubled O&G Hin Leong, according to reports compiled by Jefferies. DBS has more than $414m (US$290m) in the embattled trader, whilst OCBC and DBS has around $314.3m (US$220m) and $108m exposures, respectively.

Separately, reports also highlighted that more than 17,000 mortgagees—8,000 in DBS, 3,000 in OCBC, and 4,500 in UOB) have applied to defer their mortgage payments.

Further, at least 3,000 borrowers of which 1,200 from DBS, 300 in OCBC, and 600 in UOB 600, have applied to convert unsecured loans to term loans.

“The negative news pieces are expected and likely to continue reflecting the uncertainty and stresses faced by businesses and households,” noted Krishna Guha, equity analyst at Jefferies.

UOB’s O&G book is estimated to be 2.5% of its total loans, of which more than 70 to 80% have been provisioned for, noted a separate report by DBS Group Research. The report noted that UOB’s O&G exposures have been well-taken care off, with asset quality issues likeler to arise from the bank’s exposure to SMEs.

Meanwhile, OCBC said that its O&G exposure accounts for 5% of total loans, which includes oil majors, trading companies and offshore support vessel sectors, with the sector’s non-performing loans (NPL) ratio at 0.8% as of December 2019. The bank has been putting provisions on its O&G portfolio through F20Y19 as 65% of Q4 and FY2019’s elevated credit costs, noted DBS Group Research analyst Rui Wen Lim.

Overall, Lim expects higher provisions through the year on weaker macroeconomic outlook arising from COVID-19 pandemic, lower oil price environment, deepening recession outlook in Singapore.