By Saeed Azhar
SINGAPORE (Reuters) - Oversea-Chinese Banking Corp, Singapore's second-biggest lender, warned of sluggish loan growth this year and risks from the offshore marine sector due to weak commodity prices, as it posted its smallest profit in more than a year.
The bank posted a worse-than-expected 14 percent drop in quarterly net profit as bad debt charges more than doubled, and said the near-term outlook was uncertain.
Singaporean lenders' profits are shrinking due to slowing Asian economies, particularly China, and weak commodity prices that have boosted provisions on loans to energy services firms. Singapore's biggest lender, DBS Group Holdings, reports earnings on Tuesday.
"Loan growth will be quite subdued," OCBC CEO Samuel Tsien told reporters after the result, adding that Indonesia was the only positive market.
OCBC was also cautious about its second-biggest market, Malaysia, although it fundamentally likes the country which generated 18 percent of its earnings in the first quarter, he said.
OCBC's net profit came in at S$856 million ($636.90 million) in the three months ended March, versus S$993 million a year earlier, and compared with an average forecast of S$934 million from five analysts polled by Reuters. It was the lowest net profit since the fourth quarter of 2014.
OCBC shares were down 1.5 percent at midday after earlier dropping to as much as 2 percent to S$8.72, their lowest in three weeks.
MARINE SERVICES
In the offshore marine services sector, Tsien said the bank had classified S$897 million worth of loans as non-performing even though few defaults have occured. The offshore service sector accounts for 45 percent of its oil and gas exposure of S$12.4 billion.
Rival United Overseas Bank warned earlier this year about S$2 billion of its oil and gas exposure could show weakness if oil prices continued to stay low.
"We expect that Singapore banks will face increasing headwinds in their regional and domestic operation, driven by weaker economic and trade growth," said Eugene Tarzimanov, a senior credit officer at Moody's Investors Service.
"As a result, the banks' asset quality will likely deteriorate further, although from a very strong base."
Moody's recently placed the ratings of Singapore banks on a negative outlook.
Smaller rival United Overseas Bank on Thursday had reported a 4.4 percent fall in first-quarter net profit, in line with expectations, after lower wealth management fees and trading income hit non-interest income.
($1 = 1.3431 Singapore dollars)
(Reporting by Saeed Azhar; Editing by Stephen Coates)
