DBS’ Dubai loans exceed most foreign banks’ UAE loans

It looks like Singapore's DBS Bank has a greater loan exposure to Dubai than the majority of foreign banks in the United Arab Emirates.

DBS says its total exposure to Dubai is about 1.8 billion Singapore dollars ($1.28 billion).

"The bank believes the situation is manageable," it said in a statement on Monday. "As of today, the only credit that is captured under the standstill notice is a SGD558 million (USD400 million) bilateral loan to Dubai World Finance which represents 0.2% of DBS’ total balance sheet."

That may be so.

But DBS' $1.28 billion worth of loans to Dubai is more than most of the foreign banks had lent to the entire United Arab Emirates by the end of last year, according to the Emirates Banks Association.

These were the top lenders, according to the  Emirates Banks Association publication titled Financial Position of Banks in the United Arab Emirates, Issue 2007-2008.

Rank Bank Loans in thousands of AED
1 HSBC Middle East Bank 62,555,055 ($17,030,124)
2 Standard Chartered 28,544,360 ($7,770,894)
3 Barclays Bank 13,137,733 ($3,576,793)
4 ABN-Amro 8,234,372.00 ($2,241,859)
5 Arab Bank 7,663,117 ($2,086,337)
6 Citibank 7,058,598 ($1,921,752)
7 Bank of Baroda 6,536,936 ($1,779,726)
8 Bank Sedarat Iran 6,375,766 ($1,735,847)
9 BNP Paribas 6,200,101 ($1,688,016.61)
10 Lloyds TSB Bank 5,774,513 ($1,572,150)
11 Habib Bank AG Zurich 5,260,91 ($1,432,319.65)
12 United Bank 3,075,281 ($837,266.84)

For some reason, DBS was not among the 28 foreign banks in the United Arab Emirates named in the Emirates Banks Association publication.

But its $1.28 billion worth of loans to Dubai is more than the 12th ranked United Bank had lent to the entire UAE.

It looks like Daniel Tabbush, Asia banks analyst at CLSA in Bangkok, was not wide of the mark when he said last week:

"Within banking specifically, the biggest exposure appears to be with Standard Chartered and, secondly, with HSBC, followed by DBS." (Here and here.)

The Singapore Minister in the Prime Minister's Office and Second Finance Minister Lim Hwee Hua was quoted by Channel NewsAsia as saying last week she does not expect Singapore banks to have a large exposure, if any at all, to the Dubai debt crisis.

She was right as far as the other Singapore banks were concerned — OCBC and UOB have said they have no significant involvement.

DBS said its "exposure to the entire Middle East region accounts for around 2 per cent of its balance sheet". HSBC's estimated 1.8 per cent exposure to the United Arab Emirates was enough to send its shares plunging last week.

I am not saying DBS did anything wrong. A bank has to lend money to make money. All the big banks are involved in Dubai.

Singapore and the United Arab Emirates have been getting closer for good reasons. Both are small states on a fast growth track. I recall Government of Singapore Investment Corporation executive director and Singapore Press Holdings chairman Tony Tan's visit to Abu Dhabi in September when he offered to help the United Arab Emirates develop world-class education institutions. His speech was reported at length in the Gulf News.

DBS may be sound enough not to worry about its Dubai loans. Still, it would be most remiss not to compare its position with that of other banks.