Singapore banks face near-term headwinds; muted 3Q expected

SINGAPORE (Oct 12): Goldman Sachs expects 3Q to be muted quarter for DBS, OCBC and UOB, with margins coming pressure and muted credit growth. Meanwhile, the Singapore banks appear to be bracing for more defaults in the oil & gas sector though exposures should remain manageable.

In a Tuesday report, lead analyst Melissa Kuang says Singapore banks are expected to have a slow quarter with earnings up 1% on average quarter-on-quarter, with OCBC expected to show the strongest earnings followed by UOB and DBS.

Weighing foremost on the minds of investors is the exposure of the three banks to the distressed O&G sector. Perisai Petroleum has defaulted on its $125 million bond payment on Oct 3, with outstanding loans of $234 million; Swissco, which is restructuring its bonds, has outstanding bank loans of $231 million with DBS, OCBC and UOB among the banks named while Rickmers Maritime is in discussion to restructure its debt, with total secured loans of $379 million from banks including DBS.

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