By Saeed Azhar
SINGAPORE (Reuters) - Singapore's DBS Group Holdings booked a 20 percent jump in fourth-quarter profit and said it expected to keep bad debt charges in check this year despite headwinds from China and a rout in oil prices.
Southeast Asia's biggest bank by assets has seen its shares tumble 18 percent this year, underperforming rival lenders, on worries that earnings could suffer due to its significant exposure to China through its Hong Kong unit and tough times for the oil and gas sector.
But Chief Executive Piyush Gupta said that while bad debt charges linked to Greater China will climb amid a "challenging environment", he expects the bank's overall non-performing loan ratio will not rise beyond 1.3 percent in 2016 compared to 0.9 percent last year.
He also said he does not expect additional provisions for the bank's S$22 billion ($15.7 billion) oil and gas portfolio after it was stress-tested at $20 a barrel. Oil is currently trading at $30 a barrel.
"The market panic is overdone. This is not a Lehman moment," Gupta told an earnings briefing.
Even if oil prices stay at $20 a barrel for two years, provisions on DBS' portfolio would not exceed S$200 million, he said.
Helped by a spike in net interest margin, DBS's net profit came in at S$1 billion in the three months ended December, beating an average forecast of S$978 million from six analysts polled by Reuters.
Its net interest margin climbed by 13 basis points to a five-year high of 1.84 percent after the Singapore Interbank Offered Rate, which is widely used to price mortgages, jumped on a weakening in the Singapore dollar.
Charges for non-performing loans and other assets climbed 17 percent to S$247 million from a year earlier.
Gupta said specific provisions will rise in China and Hong Kong, but that bank is seeing improvement in its India and Indonesia businesses.
Rival United Overseas Bank was more downbeat in its tone for its oil and gas exposure, saying S$2 billion of that portfolio could be vulnerable if oil prices continued to stay low. DBS shares were up 0.4 percent in afternoon trade, outperforming rival Singapore banks.
"In my view, the outlook (for Singapore banks) is uncertain but valuations have somewhat priced in some of those uncertainties," said Krishna Guha, an analyst at Jefferies.
($1 = 1.4031 Singapore dollars)
(Reporting by Saeed Azhar; Additional reporting by Paige Lim; Editing by Edwina Gibbs)
