HSBC and Standard Chartered have little to fear from Dubai World

12/04/2009 1:30 pm EST


Jim Jubak

Founder and Editor,

The two bank stocks I like best for their big business in emerging economies don’t look like they’ll take big hits in the Dubai World debt freeze and restructuring. Initial estimates put the exposure of HSBC Holdings (HBC) and Standard Chartered (SCBFF) to the United Arab Emirates as a whole at $17 billion and $8 billion, respectively. With the possibility that the crisis in Dubai would spread to the rest of the federation, that was way too big a risk, even if, as I said in my November 30 post , the danger was remote.

Well, now we’ve got some better numbers that break out bank exposure just to Dubai World and the damage to banks from the United Kingdom looks much, much smaller indeed.

Royal Bank of Scotland (RBS) does, as feared, have the biggest exposure, the Financial Times reported on December 3, but that exposure comes to just $1 billion to $2 billion out of the company’s total $40 billion in debt. Subtract the debt owed by the parts of Dubai World that are still able to pay their debts and have been excluded from the restructuring and exposure at Royal Bank of Scotland falls to just $700 million.

Standard Chartered’s exposure to the Dubai World restricting comes in at about $350 million.

HSBC’s exposure to the restricting doesn’t even rise to that level.

So if you’re thinking of buying these two bank stocks—or already own some as I do and are looking to buy more—because you like their emphasis on developing economies, you can cross worries about Dubai World off your list.

Now, all you have to worry about is recent weakness in financial sector stocks, the global economy, rising interest rates…
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