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BP Banks: Which Has the Most Exposure?

RBS and UBS have the most to worry about in terms of credit exposure to BP's woes, according to data from <I>Dealogic</I>.



) --


(MS) - Get Report




could be among the banks to take the largest hit from the woes of


(BP) - Get Report

, judging from data provided by



As the accompanying charts shows, RBS led with $867 million in syndicated loans to the oil company over the past five years, more than any other bank. On the bond side, UBS was the top underwriter, raising $3.3 billion, followed closely by

BNP Paribas


Morgan Stanley

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. RBS was number six among banks in underwriting $2.2 billion worth of BP bonds.

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There is a big difference between the amount a bank raised as lead underwriter on a bond or syndicated loan offering and the amount it is likely to have at risk. Banks typically lend money with the intention of selling off the bulk of the loans to large investors. Since BP was considered a safe credit until it caused the giant oil spill in the Gulf of Mexico last month, the banks would not have had much difficulty selling down their exposure.

Though banks' loan exposure to BP is almost certainly manageable, it will nonetheless be an area to watch as credit markets increasingly are pricing in the risk of a BP default.

Bloomberg News

reported the annual cost of insuring against a BP default on $10 million of debt rose to $168,000 from about $100,000 Tuesday after the US Justice Department indicated it is pursuing civil and criminal probes into the Gulf of Mexico spill.

In terms of investment banking fee revenues earned from BP, BNP Paribas and Morgan Stanley were tops among advisors. Each won $19 million in investment banking fee revenue from the oil company over the past five years. That is more than any other bank, though

Goldman Sachs

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(UBS) - Get Report


JPMorgan Chase

(JPM) - Get Report

are not far behind.

The revenues themselves, which are miniscule for giant global banks, are probably less important than the loan exposure. In fact, BP's troubles related to the massive Gulf of Mexico oil spill could eventually lead to higher fee revenues if resulting financial difficulties force the oil company to consider asset sales or other measures allowing it to access additional funds. Typically, banks earn deal-related fees by extending themselves as lenders. Though the practice of tying loans to investment banking business is supposed to be illegal, it is nonetheless widely accepted in the investment banking industry.


Written by Dan Freed in New York