Singapore banks to suffer from more energy-related NPLs in Q4

Oil and gas service exposures make up 2-3% of the banks' loans.

The NPL ratios of DBS and UOB rose in Q3 2017, driven by spikes in new NPL formation, mainly from the oil and gas services sector. According to Moody's, in the case of DBS, this in part reflects a proactive move to downgrade some oil and gas services exposures ahead of SFRS 109 implementation in 2018.

Here's more from Moody's:

By opting to release excess general provisions into its profit and loss statement in Q3 2017, and simultaneously channel the excess into specific provisions, DBS seeks to minimize future volatility in its earnings.

We expect more energy-related NPLs in Q4 for the Singapore banks, but less so for DBS because of its accelerated NPL recognition in Q3. UOB, for one, said that it expects another large oil and gas NPL in Q4 2017. The total amount of oil and gas service exposures makes up 2-3% of the banks' loans.

Outside their oil and gas services portfolios, asset quality remained stable for both domestic and foreign loans across the three banks. 

In 2018, the three banks' asset quality metrics will likely be broadly stable.