Is DBS off the hook of troublesome asset quality?

Keeping a close eye on its oil & gas exposure.

The banking group has breezed past its peers in the recent results season, dodging the asset quality stumbling block which is exposure to the commodities sector, particularly oil & gas.

However, it’s not time to celebrate for DBS, as analysts say it’s not outside the crosshairs of crumbling asset quality just yet.

According to analysts from UOB Kay Hian, DBS has also made further disclosure on its exposure to China.

UOB Kay Hian says DBS’ total exposure to the Asian country was reduced from $50b to $43b, primarily due to the decline in trade loans.

Meanwhile, UOB Kay Hian says DBS has been constantly reviewing its loan portfolio.

“Management has stress tested its exposure to the oil & gas sub-sector assuming oil price stays at WTI US$35/Brent US$40 per barrel for two years. About 5% of the accounts are deemed to be vulnerable and credit costs are anticipated to be about S$100m in this extreme scenario,” UOB Kay Hian.

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