Singapore banks' bad loan provisions for oil and gas sector 'may not be enough', Moody's warns ~ 5 Aug 2016
http://www.4-traders.com/SWIBER-HOLDINGS-LIMITED-6499255/news/Swiber-Singapore-banks-bad-loan-provisions-for-oil-and-gas-sector-may-not-be-enough-Moody-s-wa-22861104/
DBS's S$17 billion exposure to O&G sector in focusShareholders also expected to grill Piyush Gupta on why bank failed to see signs of Swiber's cashflow problemsAug 5, 2016
DBS's upcoming second-quarter results briefing on Aug 8 is likely to be dominated by questions over its S$700 million exposure to failed Swiber Holdings and the consequent S$150 million hit to its earnings.
That probably means Q2 net profit - instead of an estimated S$1 billion plus - will probably be lowered by SS$150 million.
Prior to news of Swiber's collapse, five analysts had estimated that DBS would post Q2 net profit of around S$1 billion, according to Bloomberg.
Oil services firm Swiber went belly up on July 28 and is now under judicial management.
The expected grilling will zoom in on how DBS, given that it is the company's main banker, failed to see signs that Swiber was having cash flow problems amid contract delays from the latter's customers.
DBS chief executive Piyush Gupta will have to show that he is on top of the bank's S$17 billion exposure to the oil and gas sector, which accounts for 5.9 per cent of its loan book. After all, it was only in May when he said that he didn't see any imminent signs of weakening in the bank's oil and gas exposure.
DBS has said that of its S$700 million exposure to Swiber, it expects only half of this to be recovered because the exposure is only partially secured. It said that it would tap its general allowance to provide for the anticipated shortfall, taking its net allowance charge to S$150 million.
"Management intends to take the required specific provision upfront and bite the bullet in 2Q16," said Jonathan Koh, UOBKayHian analyst in an Aug 1 note.
The estimated specific provision of S$150 million would be charged to profit & loss for Q216 after writing back surplus general provision of S$200 million, he said. DBS has sufficient surplus general provision of S$629 million on its balance sheet as at March 16.
"We estimate that net profit would be reduced by 12.8 per cent to S$882 million for 2Q16," said Mr Koh.
While Swiber's collapse and Singapore banks' continued exposure to the struggling oil and gas sector remains front and centre, investors will also want to see how DBS is performing amid a lower for longer interest rate environment and a sluggish economy.
Rivals OCBC Bank and UOB reported their Q2 results last week.
Some analysts think that DBS's loans may stabilise after falling in Q1 and that its margins may take less of a dent as the bank is better at managing its deposits cost.
One analyst said that a meeting with DBS management (pre-Swiber) suggested that Q2 loan growth would be healthy from market share gains in mortgage and deal-related lending.
Bank lending continues to slide in a weak economy. The official forecast for full year 2016 growth is in the range of 1-3 per cent. Business lending fell 6.2 per cent to S$345 billion in June 2016 from a year ago - a contraction not seen since October 2009.
Business loans have been falling for 10 straight months now. Overall, bank lending in Singapore fell by 2.7 per cent in June year on year.
A bright spot is consumer loans, mainly boosted by mortgages, which rose 2.8 per cent in June from a year ago to S$245 billion, rising at the same pace in May.
The Q2 numbers of OCBC and UOB week were not sparkly - loans were flat at OCBC and up 3 per cent at UOB. Margins fell as interest rates plunged in the March to June period.
The key 3-month Sibor rate which is used to price home loans has fallen to 0.87 per cent from a January high of 1.25 per cent while the 3-month SOR used for commercial loans has plunged to 0.84 per cent from its January high of 1.76 per cent.
At OCBC, net interest margin (NIM) dropped seven basis points from a quarter ago while at UOB, it fell a bigger 10 basis points.
DBS's total loans in Q1 fell due to continued trade loan contraction but that should begin to level off, said Mr Koh.
DBS's CASA or current account/savings account ratio is superior to its rivals, so the hope is that NIM compression won't be as bad as theirs, said a third analyst.
CASA deposits pay zero or almost nothing to savers so DBS's CASA ratio of 62 per cent to total deposits as at end-March should help mitigate the impact of declining rates. OCBC's and UOB's CASA ratios are 49 and 43 per cent respectively.
As for DBS's non-interest income, there could be higher fees from doing two IPOs in Q2 - ManuLife US Reit and Frasers Logistics & Industrial Trust. Higher credit card fees is also likely from the Great Singapore Sale. OCBC and UOB also got nice boosts from credit card fees in Q2.
More of a wild card is trading income. UOB enjoyed higher trading income but it was flat at OCBC in Q2.
Thirteen lenders extended over US$736m of facilities to Swiber groupCourt hearing on firm's judicial management confirms DBS as single largest creditor; followed by China Development Bank, ICICI and UOBAug 5, 2016
Thirteen banks and financial institutions have extended Swiber Holdings and its subsidiaries banking facilities totalling more than US$736 million, an affidavit obtained by The Business Times from Tuesday's court hearing on the judicial management application filed by the listed offshore and marine (O&M) group has showed.
A list of banking facilities in the affidavit confirmed earlier reports by The Business Times, which had flagged DBS Bank as the largest creditor to Swiber. United Overseas Bank (UOB) came in a distant fourth with over US$35 million, after China Development Bank with over US$131 million and Mumbai-based ICICI Bank with over US$50.9 million.
A significant number of DBS's bank facilities are tied to ongoing projects Swiber has secured with India's Oil & Natural Gas Corporation.
DBS has a property loan tied to Swiber's business office. The bank - as well as UOB - are involved in several vessel loans on Swiber's operating fleet.
Also on the list are international lenders including Deutsche Bank, HSBC, Citibank and AFC, along with Kuala Lumpur-listed Maybank. Amex, GE-PK AirFinance, Hitachi and IBM have been named in association with certain financial services including hire purchases extended to Swiber. According to the list, the exposure of each of these international banks or financial services providers is capped at under US$17 million.
The list validated an OCBC executive's statements suggesting the bank has not extended loans to Swiber. BT also confirmed that Bob Yap Cheng Ghee and Ong Pang Thye of KPMG Services Pte Ltd were appointed as the joint judicial managers following the High Court hearing.
The High Court on Tuesday heard Swiber's judicial management application filed after the board of directors of the listed O&M player dramatically reversed a winding-up petition last Friday.
Swiber's now-rescinded liquidation bid announced in a July 28 Singapore Exchange filing shook up Singa-pore's O&M and banking sectors as well as the stock market.
The market has been abuzz with questions as to why Swiber's board of directors had opted to go with a winding-up petition instead of opting for judicial management, under which the listed group and its subsidiaries can still continue to generate cash from its ongoing projects.
Its subsequent judicial management application is viewed as a more positive development especially for unsecured trade and bank creditors and bondholders.
Gibson Dunn & Crutcher LLP's partner, Robson Lee, said unsecured creditors rank at the bottom of insolvency payment priority with many walking away with very little or nothing at the end of liquidation proceedings.
The affidavit from the High Court hearing described DBS as the single largest creditor of Swiber. The bank is reported to have played an instrumental role in convincing Swiber's board to rescind its liquidation bid in favour of filing for judicial management.
In addition to the loans tied to Swiber's property, vessels and projects, DBS has also extended a bridging loan in the form of an overdraft facility totalling US$146 million for redeeming the group's medium term notes (MTN) due on June 6 and July 6.
BT had earlier reported that DBS private equity division is believed to have also exposure to multiple Swiber's MTN programmes, although this has not been confirmed by the bank.
China's provinces enlist banks to defy overcapacity cuts ~ 14 Jul 2016
http://www.reuters.com/article/china-banks-debt-overcapacity-idUSL4N19C2M3
Italy's teetering banks will be Europe's next crisis ~ 7 Jul 2016
http://www.economist.com/news/leaders/21701756-italys-teetering-banks-will-be-europes-next-crisis-italian-job
Mom and pop investors will rule the world ~ 11 Apr 2016
http://www.hnworth.com/article/2016/04/11/mom-and-pop-investors-will-rule-the-world/
OCBC relationship manager sold us risky investment product, ruined our retirement8 Apr 2016
If it seems too good to be true, it probably is...
Our encounter with OCBC Premier Banking has been a living nightmare; we are sharing our experience to raise awareness of the bank’s ruthless tactics behind its smiling public facade.
Our bank relationship manager sold us a ‘4 month SGD Equity Fix Coupon Quanto Callable Investment’ product when we asked for a short-term savings plan or stable investment to allow us to earn a small incentive for our nearing retirement. We had some concerns regarding the choice of shares initially, but she assured us that the bank’s investment experts will assist in choosing shares with high growth potential, and even claimed that some of her customers were already earning profits. We were not sophisticated investors and were definitely not interested in high-risk investments, but she continually assured us of the stability of this investment, so we signed the deal under the impression that it was a stable short term investment with satisfactory returns.
Everything went well for the first 3 months until just before the maturity date, when she informed us that our investment had incurred a loss and advised us to hold it until it recovers. We had no access to any stock exchange or share price information, until the 7th month when we received a wealth report from the bank indicating, to our horror, that our investment value had dropped by more than half, and is now worth almost nothing.
We requested for a market analysis report of the company share and realized that the company was in fact a very unstable and high-risk one, unlike what our Relationship Manager described. There was no transparency in the entire transaction.
We appealed to their management and subsequently their Customer Assurance team to no avail, and the latter shook us off by asking us to seek resolution through FIDReC which handles up to only S$50k per claim – barely half of what we have invested.
Every cent we saved and every carefully crafted plan we made over the years to pave the way for a smooth retirement – which seemed so close within our reach after decades of tireless work – had to be halted. Plans changed. Dreams shattered.
We came to the bank to deposit our hard-earned savings with trust and hope to earn some incentive to support our retirement but instead it cost us almost everything we invested within just a few months. We hope our story will prevent others from being put through the same ordeal.”
Moral of the story – If a deal sounds too good to be true, it probably is.
Mom-pop investors rush into Swiss property at riskiest time ~ 29 Feb 2016
http://www.bloomberg.com/news/articles/2016-02-29/mom-and-pop-investors-pile-into-swiss-property-market
Italian bank panic & bail-in – The next domino to fall ~ 26 Jan 2016
https://www.youtube.com/watch?v=b_34nsXCRKA
Man kills himself as bank failure wipes out savings10 Dec 2015
The death of a pensioner, who killed himself after losing his life savings as a result of a controversial move by the government to rescue four banks, has sparked outrage in Italy, with two consumer associations calling for a criminal case inquiry.The 68-year-old hung himself at his home in Civitavecchia, a port town near Rome, after the so-called “save banks” plan wiped out €100,000 in savings held at Banca Etruria, one of the four lenders included in the government rescue deal announced on November 22nd.
“This is a disgrace and an absolute tragedy – the deposits of smaller investors are not guaranteed. The people managing the banks must be the ones to take responsibility,” Elio Lannutti, the president of Adusbef, a consumers' association which alongside Codacons has asked criminal prosecutors to start an investigation, told The Local.
The rescue deal, set up by the Bank of Italy, saw the creation of a private fund to raise €3.6 billion for the struggling banks, which included Banca Marche, CariFerrari and CariChieti.
If the bank rescue had come just five weeks later, the man's savings and those of thousands of others might have been saved by new EU rules, which come into force on 1st January.
The intention is to restructure and recapitalize the lenders with funds raised from Italy’s healthy banks, while combining their non-performing loans in a separate “bad bank”.
The rescue plan was ushered in before the EU's so-called "bail-in" rules – under which account holders with deposits of more than €100,000, along with shareholders and bondholders, would bear the brunt of losses before any public money can be used to bail a bank out - take effect.
But the move has seen some 130,000 people who held shares and bonds across the four banks lose their investments, Lannutti said.
"It amounts to a complete swindle. The only guarantees in place are for the higher savers," he added.
The pensioner, a former worker for the energy firm Enel, had banked with Banca Etruria for over fifty years, with most of his life savings tied up in bonds.
The government had promised to introduce a “humanitarian” measure to reduce the impact on small investors.
But that was no assurance for the pensioner, whose body was found by his wife a week after the rescue plan was announced.
In a document found on his computer, the man accused the bank of changing its strategy to protect bigger investors over smaller ones.
Months before the rescue plan was announced, he tried to recuperate his savings, even suggesting to the bank that he was prepared to accept less, Il Fatto Quotidiano reported.
Adusbef and Codacons have asked prosecutors to investigate whether the rescue plan decree is "compatible with criminal laws and the Constitution".
Matteo Salvini, the leader of the far-right Northern League, took to Twitter to call on the resignation of the Bank of Italy chief, Ignazio Visco.
He also lambasted the government, suggesting it was to blame for the suicide.
"Pensioner from Civitavecchia commits suicide, he loses his life savings because of Banca Etruria and an absent government."
