DBS CEO says Swiber charge a "one-off"

Singapore lender moves to reassure investors ahead of its second-quarter results on Monday after saying it could write down half its exposure to the oil and gas group.

DBS Group, Southeast Asia's largest bank by assets, has sought to reassure investors and staff on the bank’s asset quality. There has been “no drastic spike in soured loans” despite a slowing economy in the region, DBS chief executive officer Piyush Gupta said in a media briefing Wednesday.

Concerns over the health of the Singapore's biggest lender have increased over the past week after the bank announced it might write down half of its S$700 million exposure to Swiber, a Singapore-listed oil-and-gas explorer that filed for liquidation in the High Court of Singapore. DBS is one of the 10 principal banks of Swiber.

DBS will present its second-quarter results on Monday, with investors and sell-side analysts set to focus on the growth of bad assets and provisioning costs.

“The NPL ratio is rising and is expected to [continue to] rise after [DBS] went through a benign business cycle until last year,” said Gupta. “Swiber, which will be going into non-performing loans, is not material in our balance sheet.”

He further said the troubles at Swiber will lead to a “one-off” charge for the bank, although he did note the prospect for the oil-and-gas sector continues to be challenging. “If the oil prices continue to be subdued below the $40 dollar per barrel level, there will be more pain,” the executive said.

In a conference call with analysts in May, an analyst asked whether the rise in non-performing loans at DBS has anything to do with oil companies. Gupta bluntly responded with a no. 

When asked by FinanceAsia about the Swiber saga, Gupta said it was "shocking" to him because the company did not have any late payments and soured loans before it decided to wind up its operations. He said credit costs this year would be close to 25bp of the overall loan book, compared to 18bp or 19bp last year.

DBS said the company's balance sheet remains strong and Swiber's troubles have had minimal impact on its capital base. Swiber is, in any case, making attempts to rescue itself: it said on Wednesday it had been granted permission to go into judicial management rather liquidation, a move that gives it more of a chance to return to health.

Shares in Singapore-listed DBS have dropped almost 10% this year, compared with a 1.5% decline for the Straits Times Index in the same period.

In a July 27 statement to the Singapore stock exchange, Swiber said it had filed for liquidation and scheduled a court hearing in August 19, a few weeks after it failed to sell $200 million of preference shares to AMTC, a London-based private equity firm.

After spending more than 27 years in various roles at Citi, Gupta joined DBS in November 2009 and he has sought to increase the lender's use of technology to serve its customers through mobile phones and online banking. Prior to DBS, he was most recently the CEO for Southeast Asia, Australia and New Zealand at the US bank.

 

Correction: A previous version of this article stated that Piyush Gupta said Swiber would be a "one-off". This has been changed to clarify that he meant the charge DBS faces from the company will be a one-off.

¬ Haymarket Media Limited. All rights reserved.