Singapore's DBS says has $1.28 bln Dubai exposure

DBS Group, Southeast Asia's top lender, said on Monday its total exposure to Dubai was about S$1.8 billion ($1.28 billion), after worries about Middle Eastern debt drove its stock down 3 percent.

DBS, seen by analysts as the most exposed among Singapore lenders to Dubai's debt troubles, said its exposure to the whole Middle East accounted for around two percent of its balance sheet, including its 50 percent owned Islamic Bank of Asia.

"The bank believes that the situation is manageable as a substantial portion of this is to Dubai-owned companies operating in Asia that are sound, such as Labroy and South Beach, which is collateralised," the bank said in a statement late on Monday.

Investors are waiting for clarity from Dubai on billions in debt repayments after it raised fears of a second bout of global financial turmoil last week when it asked for a six-month freeze on debt issued by Dubai World and Nakheel.

DBS said the only credit captured under the standstill notice is a S$558 million ($400 million) bilateral loan to Dubai World Finance, representing 0.2 percent of its total balance sheet. It said it has no exposure to property developer Nakheel.

DBS shares closed 2.98 percent down on Monday, after a Singapore market holiday on Friday, underperforming a 1.1 percent drop in the broader index.

DBS told Reuters the $1.28 billion included exposure from the Islamic Bank of Asia, which focuses on banking in the Middle East and Asia from its offices in Singapore and Bahrain.

DBS, 28 percent owned by state investor Temasek, derives the bulk of its revenue from Singapore and Hong Kong. But in its earnings statement for the second quarter ended June 2009, it blamed an increase in non-performing loans to "exposures to shipping and Middle East corporates and institutions".

"The exposures to Dubai World debt are relatively limited, and are less of a concern compared to the spillover effects for related entities, corporates in the UAE region and potential refinancing issues," said JPMorgan in a report on global banks.

DBS has partly financed, together with UOB, OCBC, HSBC and Sumitomo Mitsui, an S$800 million loan for the South Beach property development project in Singapore, a JV between City Developments, Dubai World and developer El-Ad.

Singapore's second biggest lender Oversea-Chinese Banking Corp said earlier on Monday it has no exposure to Dubai World while United Overseas Bank said its exposure to Dubai was insignificant.

OCBC shares eased 0.4 percent while UOB fell 0.9 percent.

Singapore's central bank said on Monday the total gross exposure of the country's banking sector to the United Arab Emirates was well below 1 percent of total banking assets.

The Monetary Authority of Singapore also said in a statement that it does not expect the developments in Dubai to adversely affect the financial stability of Singapore, a growing wealth management centre and currency trading hub. 

SINGAPORE, Nov 30 (Reuters)