Venezuela turmoil a minor irritant for US banks

REUTERS[ WEDNESDAY, JANUARY 08, 2003 02:28:50 AM ]

NEW YORK: US banks with multinational operations could take small writedowns in Venezuela, where striking opponents of President Hugo Chavez have crippled the nation's all-important oil industry. But, any possible losses would barely scratch banks' profits, analysts said.

Government figures show US banks held about $1.93 billion in cross-border claims in Venezuela as of Sept. 30 -- not enough to damage banks with massive balance sheets, such as J.P. Morgan Chase & Co. Inc. or Bank of America Corp.

In addition, the instability in Venezuela began nearly a year ago, giving banks time to reduce exposure, analysts said.

"It's not a terribly large number," said bank analyst Ray Soifer, who runs his own financialconsulting firm. "Exposure to Venezuela was never particularly large compared to Mexico, Brazil, and Argentina. And credit problems in Venezuela are not new problems."

Another mitigating factor may be that most of the banks' loans are likely to be linked to state oil company, Petroleos de Venezuela SA (PDVSA), which is currently enveloped in a crisis created by the strike, but is generally considered a relatively modest risk for lenders.

New York-based Citigroup Inc. was not immediately available to comment on their exposure. J.P. Morgan had $300 million at the end of the second quarter last year, but its exposure was too small to break out in the third quarter.

Bank of America, headquartered in Charlotte, North Carolina, said its total binding exposure at the end of September was $242 million.