Local banks still facing oil and China woes
THE twin troubles of oil and China continue to beset Singapore banks, which are due to report their earnings in the second half of February.
Investors should take some comfort with the allowance already set aside by the banks for bad loans, with the trio - DBS Group Holdings, United Overseas Bank (UOB) and Oversea-Chinese Banking Corporation (OCBC) - stashing away a fiscal cushion that is more than one time the total amount of souring assets.
Still, there are some pain points to determine how badly the banks will be hurt by the two large issues. On oil, the price assumptions taken by banks, as well as loan-restructuring processes for small oil service players, should be of interest. More provisions can be expected, especially for oil-and-gas (O&G) exposure. As for China, the worry is less on asset quality, but more on growth prospects in the world's second-largest economy that is also at a tipping point.
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