4 Key Things to Learn About DBS Group Holdings Ltd’s Exposure to China

Shares of Asian banking giant DBS Group Holdings Ltd (SGX: D05) seem to have hit a rough patch lately.

To the point, after hitting a high of $21.50 last year, the bank’s share price has dwindled by nearly 30% to $15.37 as of yesterday. Worries around DBS Group’s exposure to the oil and gas industry and a slowdown in China’s economic growth appear to be some of the issues weighing on its shares.

These concerns were not lost on Piyush Gupta, DBS Group’s chief executive. In a recent briefing for the bank’s 2015 fourth-quarter earnings, Gupta had spent some time explaining its exposure to China. His focus was around this slide:

2016-03-11 DBS Group Presentation China
Source: DBS Group’s Earnings Presentation

Here’re four quick but important things to note:

  1. DBS Group’s total Greater China-related exposure was $37 billion at the end of December 2015. This was down from the $43 billion seen at end-September 2015. For context, total customer loans and total shareholder’s equity at DBS Group was $283 billion and $40 billion, respectively, as of 31 December 2015.
  2. The main driver for the lower exposure to Greater China was the fall in trade loans from $26 billion at end-September 2015 to $21 billion at the end of December. Gupta said that the bank considered the trade loans to be very solid, with most payments made on time and either backed by letters of credit or other forms of collateral.
  3. For the non-loan piece of the exposure, which was $16 billion at the end of December last year, Gupta said that it was diversified across different sectors in China.
  4. The non-performing loans (NPL) ratio for the overall Greater China portfolio was holding up well at 0.6%. For context, DBS Group’s overall NPL ratio was 0.9% at the end of 2015. The NPL ratio for the bank’s oil and gas support services portfolio was 1.3%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.