OCBC and UOB both also had specific provisions related to Hin Leong but these were less than that of DBS. Under its special provisions, OCBC took the opportunity to further write-down its loans to offshore service vessel (OSV) providers to just 10% of the collateral. Meanwhile, its general provisions — which are now classified as ECL stage 1 and 2 — were boosted by $614 million in 1HFY2020 comprising management overlay of $300 million, and macro-economic variable (MEV) adjustments of $194 million.
Regardless the increase in operating profit for Oversea-Chinese Banking Corp (OCBC) or the resilient performance of United Overseas Bank’s (UOB) regional subsidiaries or the strength of DBS Group Holdings’ net interest income and non-interest income; the banks made huge amounts of provisioning in 2QFY2020 and 1HFY2020 which impacted their bottom lines.
DBS made a special provision (now classified as expected credit loss or ECL stage 3) of $672 million in 1HFY2020, almost double that of last year, due to a significant exposure to an oil trader that became non-performing in the first quarter. The oil trader is likely to be Hin Leong Trading. In 2QFY2020, DBS continued to increase its general provisions to $849 million, with specific provisions at $173 million and taking total credit cost in the second quarter to 90 basis points (bps).
