Worswick, Stich, Thread, I found this news on HSBC banking today. Hope it was not posted here already. Sorry that I come on here so rarely these days, but currently I have other commitments.
Greetings to all,
Thomas
---------Start--------------
HSBC greatest woe still in Asia not Russia, Latam
Reuters Story - September 17, 1998 00:32
ÿÿÿ By Kathleen Kearney
HONG KONG, Sept 17 (Reuters) - Global bank HSBC Holdings Plc'sÿÿ earnings and balance sheet exposure to problem loans in Asia is likely to bring far more pain than its limited operations in Latin American and Russia, analysts said.
Its chief problem areas remain IMF-assisted countries -- Indonesia, South Korea, and Thailand -- while bad and doubtful debts in Singapore and Malaysia were also forecast to rise sharply in the second half of the year.
"Indonesia, Thailand, South Korea and to a certain extent Malaysia, these are the sore spots on the balance sheet," regional analyst Andrew Brown at Deutsche Morgan Grenfell said.
"HSBC's NPL (non-performing loan ratio) in Indonesia, we estimate to be around 40 percent, and we absolutely expect that to grow much higher. Likewise in Thailand and Malaysia."
Brown said he was forecasting total provisions of US$3.0 billion for group bad debts in 1998. This meant charges of US$1.8 billion in the second half.
Malaysia's implementation of capital controls on September 1, together with the fall in interest rates and a stable exchange rate, might forestall a major rise in NPLs there.
"The anticipated escalation of NPLs should slow because of the capital controls," regional banking analyst Tan Bong Loo at ABN Amro Securities said. "Capital controls allow the government to bring interest rates down and ease the interest rate pain."
The central bank cut rates four times in the past two months
Prior to the capital controls, high interest rates, which were needed to protect the value of the ringgit, were expected to push NPLs to 30 percent to 35 percent, Tan said.
In the first half of 1998, Hongkong Bank of Malaysia Berhad reported an 88 percent fall in after-tax profits and a total gross non-performing loan ratio of 7.3 percent.
A soft landing for Malaysia's corporate sector, which is highly leveraged, may now be possible, analysts said.
Singapore was a worry for some analysts.
"About 20 percent of their total exposure in Asia, excluding Hong Kong, comes from Singapore operations, which is quite high, and I am concerned about the asset quality of those loans," said banking analyst Steven Chan at J&A Securities.
At mid-1998, total advances attributed to Singapore were US$6.73 billion, about 20.6 percent of the group's total US$32.59 billion in loans in Asia excluding Hong Kong.
The concerns stem from the Singapore branch's exposure to the downturn in business in the island state itself, as well as Malaysia and Indonesia. Most of HSBC's Singapore loans were for commercial and international trade.
Its non-performing loan ratio was assumed to be in line with domestic Singapore banks, about 3.5 to four percent in first half 1998, Tan said. "But it is forecast to worsen, to the high single digits by the second half of 1999."
But of all the IMF-assisted countries, South Korea held the greatest threat, regional banking analyst John Hobson at Morgan Stanley said. "Total country exposure is US$3.9 billion, but provisions to date are very low."
In contrast, potential problems in Russia and Latin America were much more limited, analysts said. As far as Latin America was concerned, the banking giant's biggest problems might be in Argentina, not Brazil.
"The biggest concern is Argentina," regional banking analyst Raymond Lee at Salomon Smith Barney said. "HSBC has more of a direct exposure to the loans there.
But in the first half, HSBC Banco Roberts S.A. in Argentina wrote off only US$3 million in loans, out of a portfolio of US$5.01 billion, Lee said.
"The Brazil situation is more of a deposit book and they have not gone ahead with much lending at this time," Lee said.
If the bank wrote off its entire Latin American investment it would only be about HK$3.50 per share, J&A's Chan said.
As for Russia, the bank's exposure was very limited.
"The bank has never focused on Russia. Its exposure is insignificant," bank spokesman Gareth Hewett told Reuters.
The bank had a branch in Moscow, but little business there.
--------End----------- |
