DBS profit falls 25% to $802m in Q3

Blame the $815m net allowance for its oil and gas support services.

DBS Bank's profit crashed by 25% YoY to $802m in Q3, due to a sharp spike in allowances.

According to DBS, net allowances of $815m were taken as residual weak oil and gas support services exposures were classified as non-performing assets (NPAs).

However, excluding allowances, profits rose 4% to $1.8b.

Net interest income rose 9% YoY to $1975m, whilst non-interest income fell 3% YoY. Total income before allowances rose 3% YoY to $1.76b.

The bank said its total exposure to the oil and gas support services sector amounted to $5.3b, which is less than 2% of its overall loan portfolio.

In line with the impending implementation of Financial Reporting Standard 109, DBS accelerated the recognition of the residual weak cases as NPAs.

It got $850m from its general allowance reserve, resulting in a net allowance charge of $815m.

As of 30 September 2017, oil and gas support services non-performing assets amounted to $3b, for which cumulative specific allowances of $1.5b have been made.

OCBC Investment Research analyst Carmen Lee commented, "We expect some initial knee-jerk share price reaction to the higher-than-expected 3Q2017 allowances, especially in view of the recent good price outperformance. Pending more information and clarification after the analysts’ briefing later in the day, we put our rating and fair value estimate under review for now."