Chart of the Week: Singapore banks' lending to the O&G sector rose by as much as 20%

OCBC's exposure to the sector widened the most.

Risk appetite for Singapore banks have diverged, as OCBC's exposure to oil & gas (O&G) and O&G support services jumped the most in the past quarter.

According to Maybank Kim Eng, lending to the O&G sector rose 6-20% QoQ from higher exposures to upstream and the less risky downstream/traders segment between 4Q16 to 1Q17.

"We estimate the NPL ratio for support services rose from 9-18% in 3Q16 to 15-23% in 1Q17 as banks took proactive steps to classify some risky names into NPLs," Maybank Kim Eng said.

It added, "More names could slide into NPLs this year, but the pace of new NPL formation will ease as the weakest and most chunky exposures have been recognised as delinquent. But further deterioration of industry dynamics could require higher specific provisions."

UOB has the lowest O&G exposure, but higher NPA coverage of 116% makes it relatively shielded from any further asset-quality deterioration in the O&G sector.