Banks remain ‘underweight’ on asset quality pressures but could improve in 2H17

SINGAPORE (Dec 8): Asset quality pressures remain for Singapore banks in 2017 even as share prices have climbed on the back of the higher Singapore Interbank Offered Rate (SIBOR) and Swap Offer Rate (SOR) post-Trump’s victory, says CIMB.

“We expect the banks to continue to report high loan loss provisions in their upcoming 4Q16 results, still mostly from oil & gas, as collateral values of offshore support vessels are likely to be written down at year-end,” says CIMB analyst Jessalynn Chen in a Monday report.

“The banks’ guidance that the worst of the oil & gas credit cycle is likely over could be premature or overly optimistic,” Chen adds. “We think there could be further pressure in the oil & gas industry before the outlook improves.”

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