DBS non-performing loan formation in Q1 hits 4-year low

New NPLs declined 63% to $195m.

DBS’ non-performing loan (NPL) formation hit a four-year low in the first quarter of 2018, indicating that the pressure from the oil & gas sector is already behind it, UOB Kay Hian analyst Jonathan Koh noted. According to a report, its new NPLs declined by 46% QoQ and 63% YoY to $195m.

As a result, NPL balance declined 2.3% QoQ whilst NPL ratio receded by 6bps QoQ to 1.62%. Provisions declined by 18% YoY (excluding extra general provisions of $350m “paid for” by divestment of PwC Building) and 27% QoQ.

Meanwhile, OCBC’s NPL ratio dipped 1bps QoQ to 1.4% whilst UOB’s ratio also dipped 1bps QoQ to 1.7%. On a yearly basis, however, both were still higher than the figures last year.

The robust performance of Singapore's banks is expected to stabilise in 2018 after DBS, followed by OCBC and UOB, cleaned up their loan problems in the second half of 2017, Moody's Investors Service said.

Last quarter, DBS's NPL ratio eased to 1.7% in the quarter, after its own spike in Q3, which was also led by oil and gas services loans. Meanwhile, OCBC and UOB still struggled as their NPL ratios rose to over 1.4% and 1.8% in the financial period.