Oil and gas provisions hit DBS’ profits
(6 November 2017 – Singapore) DBS Group recorded an unexpected slide in quarterly profit, falling 23 percent to hit a five-year low as the bank nearly doubled provisions for loans to the troubled oil and gas industry.
However, the bank indicated that the worst was probably over, saying this quarter’s 87 percent hike in net provisions to a record S$815 million (A$781 million) would mean further provisions for the sector were unlikely.
“There is weakness in the portfolio. We think that weakness would typically have trickled in over the next quarters through to the end of 2018,” CEO Piyush Gupta said.
“We have just taken the opportunity to accelerate recognition of that weakness upfront into this quarter,” he added.
Net profit came in at S$822 million in the three months ended September, below S$1.07 billion profit reported a year earlier.
It also said the bank’s underlying loan growth is likely to be 7-8 percent for this year and next year, slightly higher than what was flagged at the start of 2017, driven by broad-based loan demand across the region.
Net fee income rose 12 percent from a year ago, led by double-digit growth in wealth management and investment banking fees.
DBS emphasised that its exposure to the oil and gas support services sector was less than two percent of its overall loan portfolio at S$5.3 billion.
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