Singapore banks are unlikely to be seriously affected by the Dubai debt crisis, said a government minister, after Reuters reported it could affect DBS Bank.
That would have been a double blow for the Singapore sovereign wealth fund, Temasek Holdings.
It owns big stakes in both DBS and Standard Chartered, which has been hardest hit of all the foreign banks.
The British bank, partly owned by a Dubai World company, has invested more heavily in the Gulf than other big banks and sounded bullish right till disaster struck.
It forecast Dubai would grow by 3 per cent next year — and the United Arab Emirates, as a whole, by 5 per cent — only a day before Dubai asked for more time to repay its debts, according to the Gulf News.
The Khaleej Times, in Dubai, on Friday published a Reuters report which said:
Exposure to Dubai could have a "meaningful impact" on banks across Asia, said Daniel Tabbush, Asia banks analyst at CLSA in Bangkok.
"Within banking specifically, the biggest exposure appears to be with Standard Chartered and, secondly, with HSBC, followed by DBS," Tabbush said, adding that not all banks in Asia have given details on their exposure.
Shares of Standard Chartered fell nearly 5 percent in Hong Kong, and HSBC dropped 5.4 percent. Singapore's DBS Group was untraded due to a market holiday. DBS was not immediately available for comment.
However, Minister in the Prime Minister's Office and Second Finance Minister Lim Hwee Hua said she does not expect Singapore banks to have a large exposure, if any at all, to the Dubai debt crisis, reported Channel NewsAsia.
An Emirates Banks Association publication titled Financial Position of Banks in the United Arab Emirates, Issue 2007-2008, shows that Standard Chartered was second only to HSBC among foreign banks in terms of assets (AED71.24 billion or about $19.4 billion), deposits (AED29.9 billion) and loans (AED28.54 billion) at the end of 2008.
DBS is not among the 28 foreign commercial banks in the UAE named in the publication.
DBS has a 50 per cent stake in the Islamic Bank of Asia, whose shareholders include more than 30 investors from prominent families and industrial groups from Gulf Cooperation Council countries and which has offices in Bahrain.
Standard Chartered's shareholders include Istithmar World, a Dubai World company which also has stakes in the luxury retailer Barneys New York and Cirque du Soleil as well as Kerzner International, the hotels operator, reports The National, published from Abu Dhabi.
eFinancial News, a Dow Jones company, reported:
Standard Chartered could be the most impacted of all the big banks from Dubai’s financial problems, as it has the highest proportion of loans as a percentage of its total loan book to the region, according to BNP Paribas analysts.
The analysts wrote in a report that, at the end of last year, Standard Chartered had loans worth AED28.54 billion ($7.77 billion) to institutions in the UAE, which includes Dubai and five other emirates.
The $7.77 billion, the analysts said, composed 4.2 per cent of Standard Chartered's total loan book— the highest among big banks including HSBC, Barclays, Royal Bank of Scotland/ABN Amro among others.
HSBC had the biggest loan exposure to UAE institutions last year at about $17 billion, the report said, citing data from the Emirates Banks Association, but that was only 1.8% of the UK bank’s total loan book.
Standard Chartered's rosy Dubai forecast one day before the crisis
Standard Chartered was more optimistic about the region than others, the Gulf News reported on November 24. It said:
“We are seeing a fundamentally strong recovery taking shape in the Gulf region with the UAE and Saudi Arabia leading the trend. We estimate Dubai will grow about 3 per cent next year and the UAE economy as a whole will experience about 5 per cent growth,” said Marios Maratheftis, regional head of research at Standard Chartered.
The International Monetary Fund and other independent economists have predicted the UAE will grow 2 to 3 per cent in 2010, so Standard Chartered’s estimate is the highest independent estimate.
Dubai asked for more time to repay Dubai World loans the very next day, on November 25.
Related posts:
