Singapore banks exposure to Europe not significant

OCBC with a small exposure at 1.8% of total assets would be least affected by any fallout from Europe.

According to UOB Kay Hian, Europe is not a core market for Singapore banks. Their small exposure to Europe is centred around the UK, which is unavoidable as London is a financial hub and many global banks are headquartered in London, it said.

"Some banks have reviewed their interbank counter-parties and have rationalised their list to only top-notch names. Some Singaporean banks prefer to deal with global banks with a significant presence in Asia, such as HSBC and Standard Chartered, thus the increase in exposure to the UK," it added.

Here's more from UOB Kay Hian:

Each bank has disclosed its exposure to country risk in a slightly different manner. Thus, we focus on comparing each bank’s exposure to Europe over time.

DBS Group Holdings’ (DBS) exposure to UK was only 1.6% of total assets in 2010, similar in size relative to Oversea-Chinese Banking Corp (OCBC) and United Overseas Bank (UOB). However, exposure to the UK had grown to S$7,734m, or 2.3% of total assets, in 2011. Management explained that the exposure to non-banks of S$3,692m includes government and quasi government entities. The actual
exposure to corporate loans is only 40% of the stated amount if we exclude
government and quasi government entities.

OCBC’s exposure to Europe has remained relatively unchanged at 1.8% of total assets in 2011. It has no notable investment overseas or in Europe. Its loans to nonbank customers are mainly Asia-based network customers with operations in Europe.

UOB has pared down its debt securities issued by European banks from S$1,516m as at Jun 11 to S$629m as at Dec 11. The portfolio of debt securities is diversified and spread across many countries. Thus, these investments do not surface when we scan for country risk exposure.

Overall, Singaporean banks’ exposure to Europe are mainly through interbank lending and government-related entities. Exposure to corporate loans is small. They are unlikely to impinge on the local banks in terms of asset quality. Relatively speaking, OCBC would be least affected by any fallout from Europe.