The bank with the biggest exposure to the decline and fall of Swiber Holdings has warned of more pain spreading through Singapore’s offshore sector later this year.
DBS Bank’s chief executive Piyush Gupta warned during a results briefing yesterday that he expects “contagion” to emerge as the local offshore sector remains weak. DBS’s total oil and gas exposure has increased to S$23bn with up to S$900m linked to Swiber, which sought judicial management a couple of weeks ago.
Gupta detailed how fast Swiber fell from grace, noting that even by the end of June the offshore firm had “zero overdue with us”. Swiber imploded in just six weeks, Gupta said.
DBS was facing a “classic banker’s dilemma” as Swiber neared crunch time, he said. DBS opted to extend Swiber more loans to try and keep it going, something the bank has come in for plenty of criticism.
The bank’s second quarter results were hit by Swiber’s demise, its figures down 6% year-on-year.
“Highly geared companies exposed to oil and gas sector with weak cash flows would remain under pressure,” Joel Ng, an analyst at KGI Fraser Securities said in a recent report. “The pressure on bank stocks would also be significant and may lead to less support from lenders and shareholders for any fundraising in the future.”
UOB Kay Hian, another local investment bank, warned last week that the offshore sector in Singapore may suffer a “cascade” of defaults.