Has OCBC's asset quality already stabilised?

Non-performing loans ratio remained stable at 1.3%.

Singapore banking giant OCBC can breathe a sigh of relief as its asset quality woes may have already eased in Q1.

According to UOB KayHian, the group's non-performing loan ratio was already at a stable 1.3% whilst NPL formation has moderated significantly to $391m compared to the previous quarter's $510m. Meanwhile, provisions moderated from $305m in 4Q16 to $168m in 1Q17, representing a drop of 45%.

"Management does not expect any further negative impact from lumpy NPLs. However, management felt that it is too early to conclude that the oil & gas sector is recovering," the brokerage firm said.

More so, it noted that OCBC is concerned that a prolonged trough could put further downward pressure on the valuation of collaterals. UOB KayHian also pointed out that 22% of loans extended to offshore support vessels (OSV) are already recognised as NPLs