3 Quick Facts About United Overseas Bank Ltd’s Exposure To Oil & Gas

Shares of United Overseas Bank Ltd (SGX: U11) have hit a rough patch lately.

After hitting a high of $25.05 last year, the bank’s share price has dwindled by nearly 24% to $19.02 as of yesterday. Worries around UOB’s exposure to the troubled oil and gas industry appear to be weighing on its shares.

UOB addressed this issue during a recent briefing for its 2015 fourth-quarter earnings. Lee Wai Fai, UOB’s chief financial officer, had shared some figures behind the bank’s commodity exposure, which houses the oil and gas portfolio. His focus was around the slide below:

2016-03-18 UOB Commodity Slide
Source: UOB’s earnings presentation

Here’re three quick but important notes from the briefing:

  1. OCBC’s total exposure to commodities was S$21 billion. From this amount, oil and gas accounted for S$12.1 billion of the total.
  2. The bank’s oil and gas exposure can be broken down to S$7.1 billion from the traders and downstream industries. Wee Ee Cheong, UOB’s chief executive, said that this were mostly state-owned and established global groups, short-term trade related, or are well-diversified and secured. Lee added that UOB was comfortable with this piece of exposure to oil and gas.
  3. Lee said that the vulnerable piece would be the upstream segment of the oil and gas exposure which amounts to S$5 billion. But UOB had done a deep dive from the bottom up on this area and Lee said that 20% of the upstream segment could be vulnerable but most of it is quite well-secured. He felt that the impact to charge-offs will be “significantly less.”

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.