All three major Singapore banks are Ezra’s principal bankers, but none has revealed their exposure to Ezra. A note from Malaysian bank CIMB earlier this month estimated that Southeast Asia’s largest lender, DBS, has a S$637 million ($447 million) exposure to Ezra — the largest among Singapore’s three biggest banks. OCBC’s exposure is estimated to be S$300 million ($211 million), while UOB’s is at S$166 million ($117 million).
Aside from the oil and gas industry, analysts said the real estate sector’s impact on banks is also worth watching. Cooling measures and loan curbs imposed by the Singapore government since 2009, coupled with rising interest rates, have hit home sales and the take-up of new housing loans.
“We saw the number of new mortgage originations and existing home sales slowing in the fourth quarter… I am more inclined to believe that recent developments are expected to have further spooked the real estate sector, reducing the loan pool which banks could have tapped on for revenues,” said Phillip Futures investment analyst Woon Tian Yong.
Woon said the key challenges facing the Singapore banking sector in 2017 include rising interest rates, which may worsen the credit quality of the banks’ existing loan portfolio with a greater number of defaults, and slower domestic growth.
“Singapore’s banks may have to find themselves having to further diversify their businesses amid a sluggish domestic economy. This means venturing out to emerging markets to seek a higher return than the already saturated and competitive domestic banking scene,” he said.
Still, one bright spot this year is the stabilizing oil prices above $50 per barrel after the Organization of the Petroleum Exporting Countries (OPEC) moved tocut production, Tarzimanov said. That may slow down the formation of bad loans in the industry.
