UBAF hopes to gain from Asian weakness

30 January 1998
FINANCE

The French-Arab trade finance bank UBAF says its earnings in 1998 could benefit from East Asia's economic problems because devaluation of currencies there will boost trade with the Arab world.

UBAF, which has the largest Asian branch network of any Arab bank, says it has so far avoided the Asia-related problems that are weighing down the profit outlook for many bigger banks around the world.

Based in Paris, it has branches in Japan, South Korea, Hong Kong and Singapore. The chairman of its management board, Guy de Jacquelot, says that Asian exports to the Arab world are likely to grow as currency devaluation makes them cheaper in relation to Arab currencies, most of which are linked to the dollar. The bank's existing exposure to the region is mostly in the form of short-term credits to relatively strong companies and banks, and it did relatively little business in Thailand or Indonesia, the worst- hit countries. 'We have exposure to the big Korean banks, but we consider this as zero-risk,' De Jacquelot says. UBAF will probably make a special provision for 1997 to cover Asian risk, but this will not affect the bottom line because the money will come out of surplus country provisions from the year before.

UBAF is expected to publish its results for 1997 in March or April. At the end of 1996, it had total assets of $3,417 million. France's Credit Lyonnais owns just under 44 per cent of the bank, and the rest is held, directly or through a holding company, by 30 Arab financial institutions.

The problems of East Asia do not seem to have had a significant impact on Arab banks, though it is possible that some may increase their provisioning for 1997 to cover Asian risks. So far, no Arab bank has had its credit ratings downgraded by any agency because of exposure to the region, although Moody's Investors Service says in a report on the UAE that the exposure of banks there to Asia could be a cause for concern (see above).

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