Dubai World’s attempt to restructure its debt will have a manageable impact on HSBC Holdings and Standard Chartered, reported Blomberg citing a research report from Goldman Sachs Group.
According to Emirates Banks Association, Barclays, BNP Paribas, Citigroup, Credit Agricole’s Calyon, HSBC, Lloyds, Royal Bank of Scotland’s ABN Amro and Standard Chartered extended about $36 billion in loans in 2008 throughout the federation.
Reportedly, for years, Dubai World has been a vital cog in Dubai’s international expansion into port operations, hotels and other assets. The state-run corporate entity holds almost 75% of the UAE’s total debt. Crashing real estate markets in several nations coupled with the overall economic slowdown, however, depleted the organization’s financials and led to the restructuring.
Analysts at Goldman Sachs, led by Roy Ramos, estimated that potential credit losses at HSBC would be $611m and at Standard Chartered would be $177m. About the banks’ potential losses from loans and commercial real estate, the analysts wrote in the report that “in a worst-case scenario, we expect a manageable impact at less than 1% of equity, less than 5% of net profits,” reported the news agency.
