DBS dodges bullet from AusGroup's recent loss

Its NIM is seen to widen most with US rate increase.

Even with the dangers from its oil & gas exposure and the recent reported loss of AusGroup, DBS is still in the safe zone. This is due to its expected big-time benefits from the possible Singapore Interbank Offered Rate (SIBOR) increase later this year on the back of the Federal Funds rate spike.

According to RHB analysts, DBS’s exposure to the losses of AusGroup would not be significant.

RHB said that for the Q2, AusGroup entered into accounts receivable purchase facility with DBS, with A$2.45 million already utilized.

In Q3, AusGroup entered into a A$30 million short term loan facility with DBS Bank. A total of A$11 million of this balance was drawn down as of June this year.

To recall, AusGroup reported a net loss of A$193.2 million ($198.8 million) for the end of its financial year.

"We believe the market has overlooked the positives from possible increases in SIBOR in late 2016. DBS is most leveraged to SIBOR increase – with its NIM (net interest margin) seen to widen most,"

In the previous quarter, only DBS recorded an improvement in NIM out of the three big bank giants, from 1.85% to 1.87%.