Delinquent oil and gas portfolio threatens OCBC’s sturdy loan book

Two loans worth $150m went bad in Q2.

OCBC is under threat from delinquent loans in its oil and gas portfolio, a report by CIMB revealed.

The bank reported two non-performing oil and gas loans amounting to around $150m in the second quarter. These were from Malaysian and Indonesian corporates but were booked in Singapore.

“Due to low oil prices, vessel charter rates have been coming off, which means that clients will be unable to meet the repayment cash flows and there is a need to restructure the loans. Consequently, these loans were reclassified as substandard loans,” CIMB said.

Consequently, NPL ratio rose to 1.9% in Malaysia and 1.7% in Indonesia. The bank expects oil and gas NPLs to rise further as the downcycle continues.

“Looking ahead, OCBC expects to see further stress in the oil & gas portfolio as oil prices remain low. As of 2Q, oil & gas loans made up 6% of OCBC’s loan book. Guidance is for SPs to rise from the current 9bp,” said CIMB.