UOB burdened by toxic loans from O&G firms

It expects two more bad loans from offshore support firms in H2.

UOB is still bearing pressure from the oil and gas (O&G) sector as it expects at most two more non-performing loans (NPL) from offshore support firms in H2.

UOB Kay Hian said the new NPLs are from companies that have withstood the onslaught of depressed prices for crude oil over the past three years.

"Thus, the amount of provisions required is expected to be lower," said UOB Kay Hian analyst Jonathan Koh.

Otherwise, asset quality was resilient for other industry sectors. NPL ratio is expected to rise gradually in H2.

UOB marking down its valuation of collaterals by 70-80% is considered to be a conservative approach by UOB Kay Hian. Specific provisions are conservative at 70% for the offshore support services segment.

Koh said, "The worst is over, due to adequate provisions and its steep markdown in valuations of collaterals."