Singaporean banks under pressure from oil and gas prices
(19 February 2016 – Singapore) Moody's Investors Service says that last years' financial results for Singapore lenders Oversea-Chinese Banking Corp (OCBC) and United Overseas Bank Limited (UOB) show rising pressure on their asset quality, particularly for their sizeable oil and gas exposures.
"The banks have seen a broad-based deterioration in asset quality through 2015, a trend we expect to continue because of slowing economic and trade growth in Asia, and increasing stress for oil and gas borrowers in Singapore," said Eugene Tarzimanov, Moody's Senior Credit Officer.
Both banks have reported large exposures to oil and gas borrowers.
OCBC says 14 percent of its loans to oil services borrowers are non-performing, as already reflected in its 2015 NPL ratio of 0.9 percent, up from 0.6 percent in the previous year.
UOB expects that up to 20 percent of its oil and gas loans will become exposed should prices remain weak through 2016.
The ratings agency expects both banks will increase their provisions in coming quarters, and in particular against their oil and gas exposures, which in turn will pressure their profitability.
The banks have also indicated that the quality of their other oil and gas loans, such as to producers, traders and refiners, remains resilient to the oil price collapse.
Subscribe