Here's the real score in Eurozone crisis' impact on Singapore banks

DBS, OCBC and UOB will be barely hurt.

According to UOBKayHian, 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 with many global banks being headquartered there.

Here's more from UOBKayHian:

Some banks have reviewed their interbank counter-parties and have rationalised their lists to only top-notch names. There is preference to deal with global banks with a significant presence in Asia, such as HSBC and Standard Chartered, thus their increased exposure to the UK.

We rely on banks’ disclosure of cross-border exposure of above 1% of total assets in our analysis. Each bank has disclosed its exposure to country risk in a slightly different manner. We compare each bank’s exposure to Europe over time.

DBS. DBS’s exposure to UK was only 1.6% of its total assets in 2010, similar in size relative to that of OCBC and UOB. However, exposure to the UK grew to S$7,734m, or 2.3% of total assets, in 2011.

Management explained that the S$3,692m exposure to non-banks 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. OCBC’s exposure to Europe has remained relatively unchanged. It has no notable investment in Europe. Its loans to non-bank customers are mainly existing Asia-based customers with operations in Europe.

UOB. 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. It has further reduced exposure to debt securities issued by European banks to less than S$500m as at Jun 12. 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. Singaporean banks’ exposure to Europe is mainly through interbank lending and government-related entities.

Exposure to corporate loans is small. Exposure to Europe is unlikely to impinge on local banks in terms of asset quality. Relatively speaking, OCBC would be the least affected by any fallout from Europe.

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