Banks 'not out of the woods' from oil & gas exposure

SINGAPORE (Aug 30): UOB Kay Hian on Tuesday maintained its “overweight” rating on Singapore banks, but says banks here are “not out of the woods yet”.

“Our ‘overweight’ sector call is premised on banks’ cheap valuations,” says UOB analyst Jonathan Koh in a Tuesday report. “We expect at least another two quarters of stress and deterioration in asset quality from the oil & gas (O&G) sector.”

The research house performed a stress test on banks’ earnings and target prices based on non-performing loan (NPL) ratio in the vulnerable offshore support services (OSS) segment within the O&G sector, as well as correction in collateral values.

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