http://www.thestar.com.my/business/business-news/2016/08/02/maybank-rhb-bank-low-exposure-to-singapore-swiber/

KUALA LUMPUR: Banks, including Maybank and RHB Bank, may recognise provisioning for their exposure to distressed Singapore oilfield services firm Swiber Holdings which is seeking to operate under judicial management.

CIMB Equities Research said on Tuesday Maybank has RM5.1bil (US$1.3bil) loan exposure to the O&G sector (as well as other related sectors) in Singapore, accounting for 1.2% of its total loans. 

RHB Bank’s total loan and bond exposure to Singapore’s O&G is RM500mil (US$124.4mil), based on our estimates.

CIMB Research said that providing for its exposure to Swiber could lower Maybank’s FY16 net profit by 5%. As for RHB Bank, its exposure to Swiber could cut its FY16 net profit by 5%-9%.

To recap, Swiber Holdings announced on July 28 that it had filed for liquidation. However, in a drastic turn of events, the company said the next day that it had dropped its liquidation plans and intended to operate under judicial management.

“The above sparked concerns about the banks, including Maybank and RHB Bank, with exposure to Swiber having to recognise provision/impairments.

“Maybank’s exposure to Swiber is likely through the estimated S$150mil (RM450.5mil or US$112.2mil) notes. We understand that the bank’s loan exposure to Swiber is minimal.

“Assuming that Maybank provides for the full sum of its exposure (in the form of impairment for the investments), we estimate this would lower FY16 net profit by about 5%,” it said.

CIMB Research said RHB Bank’s exposure to Swiber is through its holding of the company’s notes, amounting to an estimated S$50mil to S$85mil (RM150mil to RM255mil or US$37mil to US$63mil). 

“We estimate that full provisioning for this would trim RHB Bank’s FY16 net profit by 5%-9%. Inclusive of this, we think that the management would stick to its guidance for credit charge-off rate of 40bp for FY16, compared to our forecast of 35bp. 

“We see this as a hiccup and RHB Bank is still our top pick, given benefits from IGNITE 17 programme,” it said. 

CIMB Research retained its Overweight rating on Malaysian banks, premised on the: (1) attractive valuations of most banks, and (2) expected earnings recovery in 2017. We think the pressure on banks’ asset quality (including bond holding) would subside towards yearend.

“At the same time, we expect the credit risks from the O&G sector to gradually ease as oil prices have been stabilising and certain O&G companies have been taking steps to reduce costs and deleverage,” it said.