DBS Q3 profit in surprise slide to five-year low on oil and gas provisions

By Anshuman Daga

SINGAPORE (Reuters) - Singapore's DBS Group Holdings booked an unexpected slide in quarterly profit on Monday, with income falling 23 percent to a five-year low as it nearly doubled provisions for loans to the troubled oil and gas industry.

Singapore banks, long lauded for their conservative lending practices, have been tested over the last two years as a number of local offshore and marine firms have restructured their loans due to low prices and project delays.

Net provisions for Singapore's biggest lender jumped 87 percent to a record S$815 million ($597 million) - a move it said would remove uncertainty over its exposure to the oil and gas services sector.

 

"The recognition of the residual weak oil and gas support service exposures as NPAs will enable investors to return their focus to our operating performance and digital agenda," CEO Piyush Gupta said in a statement.

Net profit came in at S$822 million in the three months ended September, below S$1.07 billion profit reported a year earlier and an average estimate of S$1.13 billion from four analysts compiled by Thomson Reuters I/B/E/S.

"Overall, we see a decent set of underlying results. Kitchen sinking should see DBS start next year with a clean slate," Goldman Sachs' analysts said in a report.

DBS said its exposure to the oil and gas support services sector amounted to S$5.3 billion, less than 2 percent of its overall loan portfolio.

While Singapore's Oversea-Chinese Banking Corp and United Overseas Bank, have also flagged stress in the oil and gas support services sector, DBS is more exposed than its smaller rivals.

DBS also said the bank's underlying loan growth is likely to be 7 percent to 8 percent for this year and next year. Net fee income rose 12 percent from a year ago, led by double-digit growth in wealth management and investment banking fees.

The wealth management business is a key focus for DBS, which bought Australia and New Zealand Banking Group's wealth and retail business last year.

Shares in DBS were down 1.3 percent in morning trade.

Singapore state investor Temasek is the biggest shareholder in DBS with a stake of about 30 percent.

($1 = 1.3645 Singapore dollars)

(Reporting by Anshuman Daga; Editing by Edwina Gibbs)