Singapore's top lender DBS Group said Thursday that its fourth quarter 2016 net profit fell after it set aside 87 per cent more money for bad loans coming mainly from the oil and gas industry.
The bank's net profit in the fourth quarter of 2016 fell nearly 9 per cent from the year-earlier period to S$913 million, the bank said in an earnings release before the Singapore market opens.
It set aside S$462 million in provisions for the quarter, up from S$247 million a year ago.
Full-year earnings came in at S$4.24 billion, falling 2 per cent from a year earlier "as a stronger operating performance was offset by higher allowances."
After three consecutive days of decline, DBS shares opened 0.4 per cent higher on Thursday morning.
Its smaller rivals, Oversea-Chinese Banking Corp (OCBC) and United Overseas Bank (UOB), opened 0.1 per cent higher and flat, respectively.
In the quarter, net interest income fell 2 per cent to S$1.82 billion as the net interest margin fell 13 basis points to 1.71 per cent.
Non-interest income rose 19 per cent to S$952 million.
The non-performing loan rate climbed to 1.4 per cent, up from 0.9 per cent in the year-earlier quarter.
"A significant part of the increase in non-performing loans and specific allowances for the full year and fourth quarter was due to stresses in the oil and gas support services sector," the bank said in the release.
For the full year, net profit fell 2 per cent to S$4.24 billion due to higher allowances. Excluding the allowances, profit rose 10 per cent to S$6.52 billion ($4.6 billion).
The bank noted that its total income rose 6 per cent on year to S$11.5 billion, its highest ever, on higher loan volumes, improved net interest margin and non-interest income growth.
DBS proposed a final dividend of 30 Singapore cents a share, for a full-year dividend of 60 Singapore cents a share, unchanged on year.
Piyush Gupta, the bank's CEO, pointed in a statement to the rise in profit excluding allowances and said the strong operating performance was due to investments in multiple business divisions and efforts to digitize the bank.
"They enabled us to meet headwinds related to China and stresses in the oil and gas support services sector," he said in the statement.
"The financial discipline we exercised over the years in building up buffers for capital, liquidity and allowance reserves has ensured that our balance sheet remains resilient. Our financial strength will stand us in good stead in the coming year."
The bank is scheduled to hold a press briefing on the results later Thursday.
Struggles among oil and gas debtors have dominated the narrative of the Singapore banking sector over the past year.
In the latest sign of a still-weak industry Ezra Holdings flagged earlier this month that it could possibly write down US$170 million (S$241.28 million) due to problems with one of its joint ventures, EMAS Chiyoda Subsea.
On Tuesday, OCBC said net profit after tax for the fourth quarter declined 18 per cent on-year to S$789 million
Net allowances for loans and other assets of S$305 million, a jump of 57 per cent above S$193 million in the same quarter a year earlier.