OCBC’s NPL to crumble further in H2 on back of O&G exposure

Its Q2 spike will be short-lived.

Oil and gas exposure remains OCBC’s Achilles’ heel, though 61% of this segment’s non-performing loans (NPLs) are current.

According to a report by RHB, OCBC’s non-performing loan ratio is poised to spike over subsequent quarters.

“Other loan segments still have relatively healthy asset quality. Thus, we expect 2Q16 asset quality to only deteriorate marginally from 1Q16 levels,” noted RHB.

However, with Brexit and indicators like Singapore’s Purchasing Managers Index contracting for 12 consecutive months, OCBC’s NPL ratio is expected to grow in following quarters to 1.4% by end-2016.

“Our 2016 credit cost assumption rises to 41bps (from 29bps). This is consistent with Moody’s recent downgrading of its outlook on Singapore banks,” RHB noted.