HSBC monitoring Greece as US$6b exposure largest in Europe

[LONDON] HSBC Holdings Plc said it was "monitoring the developments" in Greece after the country imposed capital controls and shut banks to avert financial collapse. HSBC's US$6 billion of Greek assets is the most among European banks.

"Like all banks, HSBC has been working to prepare for such events and to take the necessary steps to meet relevant requirements," the London-based company said in a statement on Monday. "We are monitoring the developments closely and will keep customers up to date via our websites when further material information becomes available to us."

Europe's biggest lender has cut its Greek assets from US$7.3 billion since the end of 2013 and they account for 3.7 per cent of HSBC's total net asset value, mainly comprised of loans to banks and the shipping industry, Sanford C. Bernstein & Co estimates. Royal Bank of Scotland Group Plc has US$376 million of Greek exposure, also primarily to banks and shipping.

Financial stocks declined the most since 2011 on Monday, losing more than US$40 billion in market value. The seven-biggest banks on the UK's FTSE 350 index fell 1.5 per cent at 10:10 am in London, with HSBC posting a 1.7 per cent loss. The Stoxx 600 Banks Index dropped as much as 4.4 per cent, lead by declines for financial firms in Italy, Portugal and Spain.

With Greece's membership in the currency union in doubt, European banks are vulnerable to bad loans to the country as well as potential trading losses as investors retreat to the safest assets. Greece has limited daily cash withdrawals, banned overseas transfers, shuttered its stock market and closed banks until July 6, the day after Greeks vote in a referendum on proposals needed to restore bailout aid.

"HSBC is the only one with a material exposure because the bank has a 12-branch retail and commercial network in the country and cites a US$2 billion exposure to shipping companies in Greece," said Chirantan Barua, an London-based analyst at Bernstein. "Other than direct credit risk, the banks are also likely to suffer from second-order and third-order impacts if an exit actually materializes."

Bank of America Corp estimates HSBC's exposure at US$5.5 billion, followed by Credit Agricole SA with US$3.2 billion, Deutsche Bank AG with US$2.3 billion and Barclays Plc at US$1.8 billion, according to a report dated June 19. European banks have a total exposure of US$45 billion, the analysts said.

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