Aberdeen Standard upbeat on Singapore banks, warns on DBS provisions

Last Updated: Tue, Nov 14, 2017 18:04 hrs
Development Bank of Singapore's Chief Executive Officer Piyush Gupta speaks during their fourth quarter earnings announcement in Singapore

By Anshuman Daga and Jack Kim

SINGAPORE (Reuters) - Aberdeen Standard Investments said it likes Singapore banks due to their strong balance sheets and quest for new growth drivers but warned that the management of top lender DBS risks losing credibility if it takes any more big provisions for oil and gas loans.

Last week, DBS, Southeast Asia's biggest bank, reported an unexpected slide in its quarterly profit, which fell 23 percent as the bank nearly doubled provisions for loans to the oil and gas sector.

During its results news conference, DBS CEO Piyush Gupta said the bank had taken the opportunity to accelerate booking the provisions. The lender had taken provisions in some earlier quarters too.

"They have had a few rounds of kitchen sinking, so I'm not sure how long," Christopher Wong, a senior investment manager at Aberdeen, a major investor in Singapore banks, said at the Reuters Global Investment 2018 Outlook Summit on Tuesday.

Wong said he hoped that this was the last major provisioning under Gupta "because if not his credibility will be on the line".

Wong, who is part of the fund firm's Asian equities team, helps run the Aberdeen Singapore Equity fund, which had assets of S$797 million ($586 million) as of end-September and is the biggest Singapore-focused stock fund, according to Thomson Reuters Lipper.

Oversea-Chinese Banking Corp and DBS were the top two holdings of the Aberdeen Singapore Equity fund, with nearly half of the fund's assets allocated to the financial sector, as of end-September.

Wong, though, said that Aberdeen is comfortable with its stakes in Singapore banks.

"The balance sheet is rock solid, they've been beefing up risk management, the asset quality is under control and provisioning is good," he said.

($1 = 1.3607 Singapore dollars)

(Reporting by Anshuman Daga and Jack Kim; Editing by Muralikumar Anantharaman)

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