* U.S. bank exposure to Greece is overstated - analyst
* B.I.S. data do not include hedging
* Citi says exposure "manageable", Wells says "minimal"
By Lauren Tara LaCapra and Knut Engelmann
NEW YORK, June 16 U.S. banks' exposure to Greek
debt may be much less than some investors fear, according to an
analyst report on Thursday that landed as financial shares were
staging a slight recovery from Wednesday's rout.
Nomura analyst Glenn Schorr said U.S. banks have largely
hedged their direct exposure to Greek debt as well as
counterparty credit risk.
Shares of large U.S. banks have dropped over concerns about
a Greek default.
The Bank for International Settlements (BIS) has identified
$32.7 billion of credit guarantees written by U.S. banks and
brokers. The number spooked some investors on Wednesday, who
were further worried by riots in Greece and fears that the
country may not be able to pay its obligations.
Yet Schorr pointed out BIS data do not include the hedges
that banks have put on since the Greek fiscal crisis erupted
last year. Those would include purchasing protection from
insurers, demanding collateral and making margin calls.
"While there is definitely some Greek exposure in the U.S.
system, we think net exposure at the large U.S. banks and
brokers is a whole lot less than the $32.7 billion," he wrote.
On Wednesday major U.S. stock indexes declined 1.5 percent,
with financial stocks taking a bigger hit than others. The KBW
Bank Index .BKX of large-cap banks fell 1.6 percent. But by
midday Thursday markets were on the mend, and the KBW index was
up 0.3 percent.
For a graphic on latest BIS lending data see
Concern over European banks' exposure [ID:nLDE75F0IN]
Roundup of Greek stories [ID:nLDE68T0MG]
While the banks don't have much money directly at risk from
loans and derivatives, their stocks have been hit in recent
days because investors fear the European debt crisis will
indirectly damage U.S. banks' future profits, said analyst Paul
Miller of FBR Capital.
Because the crisis is causing losses for debt investors who
also provide financing to the banks, the banks' cost of
borrowing from those investors is going up.
"Any time the debt guys take some pain, bank stocks will
struggle," said Miller. "If your cost of debt goes up, it is
harder to make money."
In their most recent quarterly filings, most of the six
largest U.S. banks -- Goldman Sachs Group Inc (GS.N), Morgan
Stanley (MS.N), JPMorgan Chase & Co (JPM.N), Bank of America
Corp (BAC.N), Citigroup Inc (C.N) and Wells Fargo & Co (WFC.N)
-- did not specify their exposure to Greece.
JPMorgan Chief Executive Jamie Dimon recently said his
bank's collective exposure to Portugal, Ireland, Greece and
Spain had declined by $5 billion since the end of March, to $15
billion. Government loans were less than half of that amount.
"A lot of the exposure is corporate," Dimon said. "We've
been doing business in these countries for 75 or 100 years. We
are not backing out."
Citi spokesman Jon Diat said the bank's exposure to Greece
is "manageable" but declined to provide details. According to
the bank's most recent SEC filing, Citi had $256 billion in
sovereign exposure at the end of last year, all but 6 percent
of it in "investment grade countries."
A spokeswoman for Wells Fargo said the bank had no
sovereign exposure to Greece and that its exposure to the
country's bank and corporate sectors was "minimal."
Bank of America's most recent SEC filing put its exposure
to Greek government debt at $16 million -- hedged by $31
million in credit default protection -- and $661 million in
"We have been reducing our exposure to sovereign debt in
these countries over recent quarters," bank spokesman Bob
Officials for Goldman Sachs, JPMorgan, and Morgan Stanley
declined to comment.
Neither Goldman nor Morgan Stanley identified any exposure
to Greece in quarterly filings.
(Reporting by Lauren Tara LaCapra, Knut Engelmann, additional
reporting by David Henry; editing by John Wallace)