KUALA LUMPUR (April 22): Shares of CIMB Group Holdings Bhd are currently trading 10 sen or 2.77% lower at RM3.51 as investors are still reacting to news of the Malaysian bank having potential exposure to the troubled Singapore oil trader Hin Leong Trading of approximately US$120 million to US$130 million, translating to more than RM500 million in its loan book.
theedgemarkets.com reported yesterday that CIMB is believed to be the Malaysian bank which has significant exposure to the troubled oil trader Hin Leong that owes almost US$4 billion to more than 20 banks, including DBS Group Holdings Ltd, HSBC Holdings Plc and Standard Chartered Plc.
Market talk has it that CIMB’s exposure to Hin Leong is to the tune of US$120 million to US$130 million. This will mean an exposure of more than RM500 million in its loan book.
When contacted on the matter, CIMB said: “CIMB does not disclose or comment on specific names or clients.”
The collapse of crude oil prices has brought Hin Leong to its knees and exposed the massive losses that the company has suffered for years.
The Singapore police yesterday announced that they have launched an investigation into Hin Leong after US$800 million oil losses. The gap between the company's assets and its liabilities was reported to stand at US$3.34 billion.
Meanwhile, Affin Hwang Capital Research estimates that CIMB Group's potential exposure to Hin Leong, through CIMB Bank Singapore, stands at RM527 million to RM570 million, and represents about 0.15% of the group's loan book.
The overall loss given default depends on the value of the collateral and the potential recovery which was secured against. The research house believes that any additional impairments would only be determined post-restructuring of the debt, which may involve some haircut.
“At present, our net credit cost assumption for CIMB is at 38-40bps (vs. management’s guidance of 40-50bps for FY20) for 2020E-2022E and would have potentially factored in some impact of this event,” it said.
Nevertheless, Affin Hwang Research expects more clarity from management at an upcoming meeting.