CIMB Group has exposure to S'pore troubled oil trader Hin Leong

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KUALA LUMPUR (April 21): CIMB Group Holdings Bhd is believed to be the Malaysian bank which has significant exposure to the troubled oil trader Hin Leong Trading 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 today 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.

Amidst concerns over its ability to finance its debt, Hin Leong saw some lenders pulling its credit lines amid a plunge in oil prices never seen before in decades. 

Reuters, citing sources, noted that Hin Leong filed for a debt moratorium in Singapore last week after it began talks with creditors.

Bloomberg, citing people familiar with the situation, said London-based HSBC has the most exposure to the oil trader, with about US$600 million. 

It was made known publicly recently that the Singapore oil trader had failed to declare US$800 million of losses before its collapse. 

Yesterday, ABN Amro Bank NV became one of the latest lenders to make a claim against Hin Leong that filed for protection from creditors. It was reported that the Dutch bank filed applications for charges related to irrevocable letters of credit tied to goods and documents of Hin Leong Trading (Pte) Ltd.

For the first time in history, the US West Texas Intermediate futures contract dipped below zero to as low as negative US$40 per barrel amidst expectation of a sharp fall in global oil consumption given the curb on air travel and the movement control order to contain the Covid-19 outbreak. 

At 4.15pm, CIMB's share price is down by 16 sen at RM3.61 — hovering at more than ten-year low. The stock is trading at 0.64 times price to book and is at a PE (trading twelve months) of 8.02 times.

For FY2019 ended Dec 31, CIMB's ratio of credit impaired loans to total loans, advances and financing rose to 3.07% compared to 2.91% in 2018. 

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