Turmoil at Glencore could have repercussions for the banking sector, according to leading City analysts who are expecting the big lenders to provide information about their exposure to commodity firms in the coming weeks.
In a research note entitled The $100bn gorilla in the room, the analysts at Bank of America said: “The banking industry may have significantly more exposure to Glencore than is generally appreciated in the market.”
The note, by analysts Alastair Ryan and Michael Helsby, expects regulators conducting stress tests on banks to take a look at the exposure to commodities. The note was reported by Bloomberg and comes at a time when Glencore’s shares have had a rollercoaster ride on the stock market.
At the start of last week, the shares plunged to 68.62p – a 29% drop – although they have since recovered lost ground after a number of attempts by the company to assuage investors’ concerns. The shares closed up 5% at 124p on Wednesday, a day after the company published information about its debt to the stock market.
Bloomberg reported that the analysts added an estimated $50bn of committed lines to the company’s reported gross debt, giving an exposure three times larger than Glencore’s reported adjusted net debt of less than $30bn.
The analysts expect there to be more disclosure from banks about their exposure to lending to commodities companies when they report their results in the coming month. “We believe the numbers are big enough that banks will need to use third-quarter disclosure to alleviate what we believe will be building investor concerns,” the analysts said.
