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Update: DBS falls; bank's peers also hit by Swiber sentiment
SHARES of DBS fell 2.9 per cent on Friday after the bank revealed on Thursday evening that it has a total exposure of about S$700 million to the Swiber group of companies, and expects only half of this to be recovered because the exposure is only partially secured.
The stock closed 47 Singapore cents lower at S$15.41.
Its peers OCBC and UOB were also hit by the dour Swiber sentiment, even as the two banks have reported no exposure and "manageable" exposure respectively.
OCBC shares fell 2.3 per cent to S$8.60, while UOB fell 2.7 per cent to S$18.20. Both counters are also trading on a cum-dividend basis, meaning shares held now will entitle shareholders to declared dividends.
DBS has yet to announce its results and declare an interim dividend; its results are due on Aug 8.
OCBC is not listed as a banker to Swiber, a check with Swiber's annual report indicated. OCBC chief Samuel Tsien, without naming the company, said the bank has no borrower that has abandoned its operation.
"We do not foresee any customers who will abandon ship," he added.
UOB chief executive Wee Ee Cheong said at a results briefing: "We do have exposure (to Swiber). It doesn't worry me. It's manageable."
DBS said it will tap its general allowance to provide for the anticipated shortfall, bringing the net allowance charge to S$150 million.
The disclosure followed Swiber Holdings' stunning move earlier on Thursday to wind up the company, confirming market rumours about DBS's significant exposure to the beleaguered oil-services firm.
DBS has been very active in restructuring sales or chartering deals among its oil-and-gas clients, BT reported earlier.
In February, BT reported that DBS had secured potential buyers or charterers for certain Pacific Richfield Marine (PRM) Pte Ltd vessels. Taking the lead in marketing, DBS had reportedly bridged deals between PRM and Swiber and Ezra Holdings. DBS is a principal banker to Ezra as well, Ezra's annual report showed.
This also comes as rig builder Sembcorp Marine's (SembMarine) earnings plunged 90 per cent for the second quarter, as revenue dropped by a quarter, and finance costs and other non-operating expenses grew. Net profit for the group fell to S$11.5 million for the three months ended June 30, 2016, down from S$109.2 million in the same period last year. The group's finance costs more than doubled to S$22.5 million in the quarter due to higher bank borrowings.
To be clear, SembMarine and Swiber are operating in vastly different parts of the oil supply chain. However, SembMarine has warned that the outlook for the upstream oil and-gas-sector remains challenging.
"Despite oil prices recovering from recent lows of below US$30 a barrel to the present US$45-US$50 a barrel range, industry experts continue to forecast a prolonged downturn for the upstream oil and gas industry," said SembMarine chief executive Wong Weng Sun on Thursday.
Asked whether the group anticipates any tightening in its bank lending from the fallout of Swiber's troubles, chief financial officer Tan Cheng Tat said he is confident its banks will provide "full support" with the business it has.
"We engage them very regularly as well," he added. "So I don't think it's fair to compare us to Swiber. We're not exactly in the same space as well."