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Just How Scroomed Are HSBC And Standard Chartered On Dubai's Default?
Backdrop
Many investors have asked about HSBC/STAN exposure to Dubai World (a leading government-linked property developer/holding company) and its affiliates, amidst Nov 26 press reports of Dubai World’s request for a creditor standstill agreement on its c.US$59bn debts (source: Bloomberg). Both HSBC and STAN have declined to comment on individual firm exposures. However, press reports (Bloomberg, FT), past descriptions by both banks of their UAE wholesale banking businesses, and HSBC’s/STAN’s status as the largest and second largest foreign banks in the UAE would all suggest some level of exposure to Dubai World and other similar entities.
Context on likely HSBC, STAN exposures
HSBC had US$15.9bn of loans/advances to the UAE as at end-June 2009. More specifically, HSBC had US$3.475bn of real estate and mortgage loan exposure to the UAE as of the same period, representing 25.9% and 2.7% of our 2010E net profit and shareholders’ equity projections for the group. STAN had US$12.3bn of cross-border loan exposure to the UAE as at end-June 2009 (and US$7.8bn of locally-booked loans to the UAE as at YE08). More specifically, STAN had US$1.674bn of real estate and mortgage loan exposure to the Middle East/South Asia region as of the same date. We estimate c.60% of this exposure, or US$1.0bn, was to the UAE, representing 22.4% and 3.4% of our 2010E NPAT and shareholders’ equity projections for STAN.
More clarity needed; first stab at worse-case loss estimates
Immediate questions include: how much actual exposure do HSBC, STAN have to Dubai World and other potentially similar situations, and what level of ultimate write-downs may need to be taken, what impact to EPS, BVPS? Key swing factors: level of continued support from other parts of the UAE, mode of loan restructuring undertaken by major creditors, degree of knock-on impacts to other UAE corporates, other emerging markets. Our first stab at potential worst-case loss estimates suggest a manageable impact: assuming a 50% NPL ratio/50% loss given default on commercial real estate loans, and a 20% NPL ratio/50% loss given default on mortgage loans, we estimate the potential credit losses to HSBC and STAN at US$611mn and US$177mn – or 4.6% and 3.9% of 2010E NPAT, 0.5% and 0.6% of 2010E equity.
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Thanks... :-)
You guys always come up with the goods !
This will be the story that redefines "BLACK FRIDAY" for a generation to come.
Mark my words, it will cause a world wide equity and bond market crash puncturing the bond bubble in many nations and taking corporate bonds down from their lofty overvalued heights.
On that note, have a Happy Happy Thanksgiving!
I presecribe 1 bottle (750ml) of Wild Turkey to help digest the next 96 hours.....
I really gathered much from this.Thanks for sharing.
accounting degree | engineering degree | business administration degree
IHS's Randolph Says Dubai Sovereign Risk Is 'Overblown'
Robo, your ability to match graph to picture remains unparalleled.
Watch the Dubai exchange here:
I"m sure Randolph is still holding all those Lehman shares which the "experts" said was an overblown risk last year.
Maybe he has some WaMu too!
Or Some Bear.
Or Some Indymac.
Or Some Colonial Bank.
Yup, all that crap is just so "overblown".....
Thanks for sharing this great article!
business management degree | computer science degree
A Cygnus atratus must be worth an extra 200 points on the Dow at least.
Does anyone have a handle (CAN anyone whave a handle?) on who has what CDS exposure to this Dubai debt?
Gold going up again... Jejeje! $1200 here we come..
Anyone know if the French banks had any Dubai exposure?
Allu Akkbar!
goooooooooooddammit
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Thanks for the update TD ... HSBC and DB are **ittygroup screwed as per E. European liabilities; especially bc of ties to currency/ interest swaps. And the powder-keg begins to go pop. Tick-Tock PIGS.
What happens in Dubai does NOT stay in Dubai !
Timmy & Ben say Dubai is likely "contained"...
Isn't that what they said about subprime?
This "Dubai shock" will be a great read on what the PPT's remaining firepower is to hold the market up.
Light volume friday means they may be able to stem the bleeding, but for how long?
Today I am thankful that both StanChart and HSBC stand to get their faces ripped off. Couldn't have happened to a nicer couple of debtpushers.
what is the estimated cds exposure,bad retail mortgage exposure, and repackaged debt exposure in dubai. I would expect all aspects of dubai debt to worsen. remember bad mortgage debt in america is limited to subprime and is noncontagious.
what is the estimated cds exposure,bad retail mortgage exposure, and repackaged debt exposure in dubai. I would expect all aspects of dubai debt to worsen. remember bad mortgage debt in america is limited to subprime and is noncontagious.
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