ANZ ‘well provisioned’ for hit from collapsed oil trader Hin Leong

ANZ chief executive Shayne Elliott has admitted a large exposure to collapsed oil trader Hin Leong that will take time to resolve.

ANZ will take a hit from the collapse of Hin Leong Picture: Hollie Adams

ANZ chief executive Shayne Elliott has admitted a large exposure to collapsed oil trader Hin Leong that will take time to resolve, but expressed confidence in the health of the bank’s broader institutional oil and gas lending book.

ANZ’s results showed its exposure to the demise of one of the world’s biggest oil traders reflected most of a $272m charge it took within its institutional lending book. That charge was part of an overall $641m provision for the division, which included expectations for future loan losses related to COVID-19.

“It is not going to resolve itself quickly. We are very well provisioned for that,” Mr Elliott said, referring to the collapse and bankruptcy process.

“It would appear to be a fraud … it is a unique set of circumstances.”

Singapore-based Hin Leong last week filed for bankruptcy protection after hiding $US800m ($1.2bn) in futures trading losses on the instruction of its billionaire founder Lim Oon Kuin. The collapse has entangled ANZ, Westpac and Macquarie Group locally and debts amounting to $US3.85bn spread through 23 banks globally, according to legal filings. HSBC faces the biggest exposure at $US600m.

Mr Elliott said that while the demise of Hin Leong didn’t appear related to COVID-19 or an oil market rout, ANZ had done a deep dive on 18 sector exposures and was comfortable with those in the oil and gas book.

“We remain comfortable in the quality of our position … it (Hin Leong’s situation) is not indicative of what’s happening across oil and gas.”

ANZ’s exposures in the oil industry were predominantly large global names, Mr Elliott added.

“Clearly the oil and gas market will be distressed, the good news is that most of the oil and gas majors … are generally extremely strong credits with huge amounts of cash and liquidity. So there will be some stress but we don’t expect there are going to be any credit issues as a result.”

This week banks including Standard Chartered and HSBC divulged their own Hin Leong exposures.

HSBC accounts showed a jump in its reported credit impairment charge, which cited the impact of COVID-19 and a “significant charge” related to an exposure in Singapore.

Filings by Hin Leong showed the company owed ANZ $US186m and Westpac $US54m.

Macquarie’s exposure should become clearer when it reports its full-year profit next week.

Macquarie’s infrastructure arm owns a 34 per cent stake in a Singapore oil terminal part owned by Hin Leong. Macquarie has owned the holding in Universal Terminal since early 2016, after paying $US440m for its stake.

The asset manager and investment bank owns the holding through its MAIF Investments private equity fund, managed through the Macquarie Infrastructure and Real Assets division.

The revelation of hidden losses was made in a court filing after Mr Lim said he would step down from both Hin Leong and its shipping arm Ocean Tankers.

“I had given instructions to the finance department to prepare the accounts without showing the losses and told them that I would be responsible if anything went wrong,” Mr Lim said in the filing.