Lacklustre lending environment further chokes banks amidst O&G woes

Loan growth has been dropping for 9 months in a row.

Singapore’s plummeting lending industry is taking a toll on its three largest banks, as loan growth slipped into the red for the past nine months, the longest streak since mid-1990s, analysts said.

BMI Research revealed that DBS, UOB, and OCBC are under pressure of a weak lending environment on top of a sluggish economy and the banks’ oil and gas woes, following the Swiber fiasco and their wide exposure to the sector.

“The plunge in outstanding credit is a sign of myriad headwinds faced by the banking sector including a mediocre domestic growth outlook, a continued downturn in the domestic residential property market, and a structural slowdown in the Chinese economy,” BMI Research elaborated.

Analysts also believe that the gloomy condition will persist through the end of 2016 and into 2017.

“As a result, we retain our downbeat loan growth forecast of -1.0% for 2016, and note increasing downside risks to our forecast for a modest rebound to 1.5% growth next year,” BMI Research added.

DBS is battered by a huge exposure to Swiber estimated at $721 million at the beginning of August. Along with DBS’ exposure to the broader oil services, the Swiber fallout is expected to weigh on the bank’s earnings over the coming quarters.

Aside from DBS, OCBC also has around half of its total $12.6 billion total o&g exposure to the oil services sector, while UOB has also warned regarding its oil services assets.