Hong Kong banks face rising risks amid prolonged property slump, Moody’s warns
Moody's Ratings predicts that Hong Kong banks will likely become more selective in lending to property developers due to the ongoing property slump, which poses a "major risk" to lenders. As of June, property development and investment loans constituted 16% of banks' total lending portfolios, highlighting a significant exposure to the sector.
The agency noted that banks have considerable exposure to commercial property and could face increased asset risks. Specifically, New World Development (NWD), a prominent Hong Kong developer, has historically benefited from strong banking relationships and unsecured lending; however, the company's high leverage and recent financial performance, including a record loss of HK$19.7 billion, may lead banks to reassess their lending strategies amid falling home prices and uncertain economic conditions.
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Moody's Ratings predicts that Hong Kong banks will likely become more selective in lending to property developers due to the ongoing property slump, which poses a "major risk" to lenders. As of June, property development and investment loans constituted 16% of banks' total lending portfolios, highlighting a significant exposure to the sector.
The agency noted that banks have considerable exposure to commercial property and could face increased asset risks. Specifically, New World Development (NWD), a prominent Hong Kong developer, has historically benefited from strong banking relationships and unsecured lending; however, the company's high leverage and recent financial performance, including a record loss of HK$19.7 billion, may lead banks to reassess their lending strategies amid falling home prices and uncertain economic conditions.
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