4 Quick Things to Know About DBS Group Holdings Ltd’s Exposure to The Oil & Gas Industry

DBS Group Holdings Ltd (SGX: D05) held its 2016 third quarter earnings briefing at the end of October.

Piyush Gupta, DBS Group’s chief executive, spent a good amount of time talking about the bank’s exposure to the oil and gas industry. Part of the discussion was on the embattled Swiber Holdings Limited (SGX: BGK).

But there is more than just Swiber when it comes to DBS Group’s exposure to the oil and gas industry. Gupta referred to the following slide when talking about this:

Source: DBS Group’s presentation

Here’re four quick notes:

  1. DBS Group’s total exposure to the oil and gas industry is around S$20 billion. The oil and gas industry exposure was broken out into two major portions. The first piece included the producers, traders, and processors. This made up around S$12 billion of the exposure, down from S$16 billion in the second quarter of 2016. The reduction came from the producers’ sub-segment. Gupta said that DBS Group had cut back on trade financing for the producers. He explained that it was a margin and liquidity issue.
  2. The second piece was labelled “Others” and included offshore support services providers. This portion accounted for around S$7 billion of DBS Group’s total exposure of S$20 billion and is unchanged from a quarter ago. Gupta said S$2 billion of the $7 billion exposure belonged to state-owned or government-linked shipyards.
  3. This leaves DBS Group with a S$5 billion exposure to the offshore support services segment. In a similar manner to the second quarter of 2016, the S$5 billion exposure can be further split it into two blocks. The first block, worth around $2.3 billion, can then be split into five names. In the previous quarter, Gupta said DBS Group had exposure of around S$600 million to each of the five names and that one of them had displayed weakness in its business. He updated during the 2016 third quarter earnings briefing that this unnamed company has since been classified as a non-performing loan. But DBS Group does not expect to take significant losses for this company.
  4. The other block from the S$5 billion piece of exposure, worth $2.7 billion, was distributed among 90-odd companies. Gupta said that around half of the 90 names had weaknesses in their business. This was up from around one-third in the second quarter of 2016. He added that part of it was Swiber-linked.

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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.