Dubai exposure not material, says Standard Chartered

Bank criticised for failure to reveal full detail of its lending in the region
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The Independent Online

Standard Chartered, the emerging markets bank, yesterday sought to calm mounting market fears about its exposure to the financial crisis in Dubai, claiming it would have only a limited impact on the company.

Finance chief Richard Meddings said the Standard Chartered Middle East and South Asia loan book had only $400m (£246m) of commercial property loans within it.

However, around two-thirds of the book does hail from the United Arab Emirates and, significantly, Standard Chartered has refused to quantify its exposure to the crisis in Dubai. The bank has taken $320m of provisions in the region in its wholesale division, primarily relating to Saudi Arabia.

Standard Chartered said: "With regard to recent developments in the UAE, the situation remains in its early stages and is fluid. However, given the profile of our exposures in Dubai, we do not believe any impairment would be material."

Standard Chartered said that it was on track for "a strong performance in 2009, building on the record income and profit in the first half of the year". Excepting Dubai, the company said it was noticing positive trends in lending but warned: "We remain watchful of the credit environment."

Standard Chartered has benefited from its lack of exposure to Western economies which have borne the brunt of the financial crisis. But the financial turmoil in Dubai has threatened to wash over Standard Chartered, whose fortunes have risen as a number of competitors have been forced to rein in their ambitions in its core markets. As a result, the shares have fallen 12 per cent since the emirate said it needed investors to grant a debt standstill for two of its flagship companies last month. It has been reported as having a sizeable exposure to state-owned Dubai World, which is seeking to restructure $26bn of loans.

The bank said performance had been driven by wholesale banking, including investment banking activities such as trading foreign exchange and interest rate swaps. It has sought to calm fears that it is involved in "casino" capitalism – using its own money to trade – by saying its business is principally "client-driven".

On its robust wholesale business, the company said: "The level of client income has shown resilience in the second half of the year and client income year to date comprises around three-quarters of total wholesale banking income."

Analysts are broadly supportive of the bank, although there was some unhappiness yesterday with Standard Chartered's perceived lack of candour over the Dubai issue.

Mark Phin, a banking analyst at Keefe, Bruyette & Woods, said: "The lack of detail on UAE and reduction in the operating leverage at the group level could drive some early weakness, but we see nothing to get overly concerned about."