International Business & Economy Highest paid DBS CEO Gupta can't see Swiber's problems

Highest paid DBS CEO Gupta can’t see Swiber’s problems

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By: 永久浪客/Forever Vagabond

DBS CEO Piyush Gupta, a new citizen, received the biggest pay raise among the big 3 local banks last year. He is the highest compensatedamong the local bank chiefs. Mr Gupta’s total remuneration rose 7.9 per cent to $10.9 million last year.

But despite being the highest paid, Mr Gupta cannot see the financial implosion of Swiber Holding. He was completely caught off guard, as acknowledged by him in yesterday’s press conference.

Recounting the Swiber saga, Mr Gupta noted that “Swiber imploded in six weeks”. “This thing unravelled between late May and mid-July. So when people say you should have known, none of the indicators showed it,” he tried to defend himself.

“Company was doing well”

“At the end of June, Swiber had zero overdues with us on any outstanding working capital. Its order backlog was $1.35 billion in February. By every dimension, at the end of the first quarter, you would say that the company was doing well. There’s nothing to tell you until March or April that there was any problem,” he continued to justify himself for backing Swiber.

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Last month, Swiber stunned the market by seeking to be wound up. It then switched tack to place itself under judicial management.

Mr Gupta also defended his decision to extend additional loans to the company when it was already on shaky ground. One of the reasons is because Mr Gupta had believed that a supposedly new investment of US$200 million from a London-based private equity firm would come. But when the investment was “delayed”, DBS gave Swiber additional loans to pay off its bond redemptions due in June.

In July, when another bond redemption was due, DBS gave Swiber further loans for it to tie over. By then, Swiber was in serious trouble cause no investment was coming from the London-based private equity firm.

At the time, Swiber was also working on 2 projects. Mr Gupta said, “If the projects get completed, I can recover $400 million. If they don’t get completed and the company folds, I’m out $400 million. It’s a classic banker’s dilemma. Do we put in more money to recover more or not?”

But he continued to bet on Swiber by granting it all those additional loans.

As of July, DBS’ exposure to Swiber rose by some $70 million to a total of $721 million. DBS has set aside $400 million of allowances for its exposure to Swiber. Of this, DBS drew down $250 million from its own general allowance reserves, a fund that banks have to set aside for rainy days, while it took a charge of $150 million.

Meanwhile, it has also been revealed that DBS’ total exposure to the oil support services sector stands at about $7 billion to companies other than Swiber. Mr Gupta said about $900 million “has weakness”, as some of these companies it lent to are Swiber-linked.

“So there will be some contagion in the second half of this year,” he warned.

Netizens call for Gupta to resign

Online, netizens were angry asking for the resignation of Mr Gupta.

Jm Chow said, “According to this report, a year ago, DBS had a loan to Swiber amounting to just S$132 million… when oil prices crashed, from over $100 to less than $40 a barrel, any rational investor will not pour good money into the oil support-services sector… as companies will suffer from bad business and are definitely in danger of going bankrupt.”

“Againt common sense and prudent fund managment… DBS invested hundreds millions more in Swiber with a total loan to S$330 in June this year. DBS Chief Executive Officer Piyush Gupta was reckless to gamble on Swiber… throwing an additional $197 millions, knowing that Swiber was already a sinking ship. Now DBS stand to lose a whopping S$721 million in bad loans to Swiber. It is a FIASCO !!!” Jim added.

“Gupta is now trying hard to blame ‘others’ for the huge loses… trying hard to keep his job as CEO of DBS. Shouldn’t Gupta be fired immediately!!!!” Jim concluded. “Losing more millions and still managed to keep their jobs. If DBS decides to keep Gupta, then the whole board (from Chairman down) should be fired… and the govement should be questioned… and made to account for this fiasco at DBS at the next sitting of Parliament.”

Francis Png also wanted to see Mr Gupta sacked, “Reckless AND Poor foresight just like the poor judgement/timing of the UBS/Citi deals. YES – He should be sack IMMEDIATELY and all bonus due stopped and past 2 years’ payment claw back. BUT then, people who had lost even more are still sitting around on their fat ass so, HOW to sack ??”

Another netizen, Kuan Tek Seang, added, “It is so obvious that the bank knew about Swiber. Plans to raise equity doesn’t mean debt-to-equity ratio will be addressed as is proven to be the case. Who can guarantee those plans won’t fall through? DBS took a risky decision to extend credit to Swiber and it is time Gupta admit that it is so.”

But in Singapore, it’s unlikely Temasek Holdings will sack Mr Gupta. Many of the elites in the establishment even get promotions after screwing things up badly. This is how Singapore is run by the PAP these days after the old guards were all gone.

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