DBS Group is delighting in strong growth momentum in its crucial services, but property quality pressures will continue in its oil and gas loan book, President Piyush Gupta said yesterday.
The oil and gas sector, particularly companies doing assistance services, has actually seen higher non-performing loans in recent quarters as weak oil rates have actually struck industry players hard.
” The sector continues to remain challenged,” Mr Gupta said.
Even for companies servicing oil producers, “contracts are picking up somewhat, however, the oil and gas service players do not have pricing power”, he added. “So they’ve been able to get short-term contracts however they’ve not been able to price up, and the rates that they’re getting on the agreements today are barely able to cover operating expense. It’s tough for them to cover interest payments.”
The non-performing loan rate rose to 1.5 percent in the second quarter from 1.1 percent in the very same duration a year earlier.
The number of non-performing possessions (NPA) stood at $4.83 billion, up from $3.05 billion a year before.
Specific allowances totaled up to $304 million for the 2nd quarter.
Mr Gupta noted that DBS may have to make more particular allowances on the ships that are presently non-performing. “It would be no more than another $300 million, and a lot of that could occur next year however it depends upon negotiations and when we really offer the ships,” he said.
Mr Gupta was speaking at a media briefing on DBS’ second-quarter outcomes. Singapore’s greatest lender reported that second-quarter net earnings increased 8 percent from the same period a year ago to $1.14 billion.
Overall earnings hardly changed from a year ago at $2.92 billion, as higher net interest income was offset by the impact of lower trading, investment and fixed property gains.
Net interest income rose 3 per cent from a year ago to $1.89 billion. Loan growth of 6 percent balance out the impact of a 13-basis-point decline in net interest margin to 1.74 percent.
Net charge earnings rose 1 per cent to $636 million, while other non-interest earnings fell 13 percent to $400 million from lower trading earnings and gains on financial investment securities, as well as an absence of gains on fixed properties.
Organisation momentum is strong, Mr Gupta said, with new bookings of home mortgages rising in the 2nd quarter to the highest level in five years and possessions under management (AUM) in its wealth company increasing 16 percent from a year ago to $175 billion.
As soon as the gotten organisation from ANZ is incorporated with DBS, another $20 billion of AUM will be contributed to the pool, he said.
Profits per share was $1.76 for the 2nd quarter, up from $1.67 a year back, while net book worth per share was $17.49, up from $16.48 a year ago. DBS has declared an interim dividend of 33 cents a share for the very first half.
DBS is the last of Singapore’s 3 lending institutions to report second-quarter numbers.
Last week, OCBC Bank said net revenue jumped 22 percent from a year previously to $1.08 billion as its banking, wealth management and insurance operations provided a strong performance.
United Overseas Bank then reported that net earnings for the 2nd quarter increased 5.5 percent to $845 million from selling more loans at greater margins.