Singapore banks shake off oil & gas loan burdens

O&G debts made up 2%-3% of their total loans.

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.

According to a report, the three banks' nonperforming loan (NPL) -- or unpaid loans -- ratios rose moderately among oil and gas services exposures but were largely stable or better in remaining types of loans.

NPL ratios of OCBC and UOB rose to over 1.4% and 1.8% in Q4 2017, driven by markedly higher net new NPL formation, mainly from the oil and gas services sector

In contrast, 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.

It is likely that these banks recognized most of their oil and gas problem loans either in third or fourth quarters of 2017 before Singapore Financial Reporting Standards (SFRS) (I) 92 implementation on 1 January 2018.

Moody's VP-senior analyst Simon Chen said, "We expect fewer oil and gas related NPLs for the three banks in 2018, after their recent accelerated NPL recognition. Oil and gas service exposures make up 2%-3% of banks' total loans."