Banks' higher bad debt charges reflect harsher environment

A LOT of attention has been focused on the jump in bad debt provisions of the local banks which released their fourth-quarter results last week. What probably jolted also was the comment by DBS chief executive Piyush Gupta that as the Singapore economy slows, more defaults will show up. After all, for much of last year, Southeast Asia's largest bank was teflon-like even when its smaller rivals started posting mortgage defaults. It wasn't that DBS did not have any sour loans. There were the odd charges for a few bad debts in India and a copper smelter in China, but hardly anything significant.

And while the rivals began posting home loan defaults, DBS actually showed an improvement. In its Q3 results, DBS's non-performing loans (NPLs) for housing stood at S$110 million on Sept 30, unchanged from June 30, but down from S$119 million a year previously. OCBC Bank and United Overseas Bank in contrast reported higher NPLs from bad loans for high-end mortgages. UOB recognised housing NPLs of S$166 million in the last two consecutive quarters, pushing them to S$502 million in Q3. And OCBC's housing N…