The three major Singapore banks may have gotten past the build-up in bad loans from the oil and gas sector by setting aside billions of Singapore dollars combined, but economic uncertainties are expected to persist through 2017 may hinder growth.
The three banks, DBS Group Holdings, Oversea-Chinese Banking Corp (OCBC) and United Overseas Bank (UOB), reported their fourth quarter earnings this week and were all hit by the continued troubles among oil and gas support services firms.
While the banks' management shared the sentiment that bad loans formation from this sector will slowdown in 2017, they guided for a modest growth in loans this year given the uncertain economic environment that has seen companies and individuals hold back spending.
As well, efforts by the Organization of the Petroleum Exporting Countries (OPEC) and other major producers led by Russia to trim nearly 1.8 million barrels per day from global markets in the first half of the year has supported prices above $50 a barrel.
Speaking on CNBC's Squawk Boxon Thursday, Krishna Guha, equity analyst at Jefferies & Company, said given that the banks' growth guidance "hasn't been anything spectacular", it is not yet time for investors to buy into Singapore banking stocks.