UOB risks losing over $2b if oil prices stay depressed, say analysts

Its oil and gas exposure is raising concerns.

While its earnings were slightly above expectations, the bigger concern in the banking giant’s results is its worrying exposure in the oil and gas sector.

According to a report from OCBC, UOB is concerned about its exposure to the upstream industries in the O&G sector, which amounted to $5b, as some of the companies in the sector may be facing cash flow problems due to depressed oil prices.

“It estimated that about S$2b may be vulnerable if oil prices stay low, but as clients are still servicing their loans, these have not been re-classified,” OCBC said.

Meanwhile, another source of concern is its China exposure of $21.1b.

“Of the S$11b bank exposure to China, 65% is trade-related with bank counterparties and around 75% is with the top 5 domestic banks and policy banks. Management shared that they are comfortable with its exposure in China as it deals mainly with top tier domestic banks and state-owned enterprises,” OCBC said.