Southeast Asia’s largest bank, DBS Group Holdings, unexpectedly set aside another 815 million Singapore dollars ($597.4 million) to cover for bad loans from the troubled oil and gas sector – a move it hopes will finally put worries over asset quality behind it.
That action resulted in a 23 percent year-on-year fall in net profit to S$822 million ($602.2 million), the bank said in its third-quarter earnings release. That fell short of the S$1.13 billion ($828.2 million) average estimate by analysts in a Reuters poll.
DBS, wrapping up earnings season for Singapore’s largest banks, lagged behind its smaller peers. Oversea-Chinese Banking Corp’s third-quarter net profit jumped 12 percent from a year ago to S$1.06 billion ($776.8 million), and United Overseas Bank reported a 12 percent increase to S$883 million ($647.1 million) over the same period.
But DBS Group Chief Executive Piyush Gupta said the bank was being conservative in recognizing bad loans. He explained that his company decided to classify certain loans as non-performing even though they are not yet overdue.
Doing so will allow investors to turn their focus to DBS’ “operating performance and digital agenda,” he added.
“We’ve chosen in this quarter to be conservative and to be proactive,” Gupta told CNBC. “We bumped up our provisions to 1.5 billion (Singapore dollars) to cover everything else. Therefore, I think we’re pretty much cleaned up on this portfolio and I really do not expect to see any further impairments coming down the pipe on account of offshore marine and oil and gas.”