DBS lags OCBC and UOB in profitability

It cut its coverage ratio for nonperforming loans to 83%.

Whilst OCBC and UOB posted stronger profitability in the first nine months of 2017, DBS's results showed otherwise, Moody's Investors Service revealed.

Aside from accelerated recognition of nonperforming loans (NPL), DBS also suffered from large specific provisions and lower trading gains.

OCBC and UOB maintained their NPL coverage ratios above 100% in Q3, whilst the ratio for DBS fell to 83%. According to DBS, its unsecured oil and gas services NPLs are provisioned at 100%, implying there is limited room for additional provisions for these unsecured loans.

On the upside, Moody's said DBS's credit costs will likely decline substantially in Q4 because the bank has proactively downgraded a large number of exposures in Q3 ahead of the implementation of Statutory Board Financial Reporting Standard (SFRS) 109.

The three banks' recurring pre-provision income growth remains healthy, supported by continued growth in fee income from wealth management and bancassurance businesses, as well as a modest widening of net interest margins (NIM).

OCBC's NIM rose to 1.66% in Q3, UOB's rose to 1.79%, and DBS' rose to 1.74%.

Moody's forecasts the NIMs will improve as interest rates in Singapore rise in tandem with rates in the US. The banks said their interest rates could reflect 40-60% of increases in the US.