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HK Property Slump May Pose Risk for Lenders – Moody’s
The prolonged downturn in Hong Kong Property poses a significant risk to lenders, potentially leading to higher loan-loss provisions and stricter credit lines, according to Moody’s. As of June last year, property development and investment loans made up 16% of Hong Kong banks’ total lending. “Hong Kong banks have large exposures to commercial property and may face heightened asset risks. Prominent Hong Kong developers, such as New World Development (NWD), have historically enjoyed strong banking relationships and lending was usually on an unsecured basis”, the report from Moody’s read. The rating agency noted that major developers like NWD, one of the most highly leveraged companies, could face increased challenges, with smaller developers being the hardest hit. NWD’s net gearing rose from 55% to 89% in June, and the company posted a record loss of HK$19.7bn. Meanwhile, Hong Kong’s residential property prices dropped by 12.52% in 3Q 2024, marking the 11th consecutive quarter of decline.
Dollar Bonds of HK banks however continued to trade stable. For instance ICBC’s 3.538% 2027s traded at 97.49, yielding 4.53% and Bank of East Asia’s 5.825% Perp traded at 99.4, yielding 6.71%.
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