Investors continued to punish banking stocks yesterday, after a warning from the Hong Kong Monetary Authority that subprime-related losses could force them into the red. Small to medium-sized lenders were among the hardest hit on speculation they would be less able to withstand the impact of the worsening credit crunch that this week saw central banks in the United States and Europe add funds to their financial systems. Fubon Bank (Hong Kong) was the biggest loser, falling 8.04 per cent. Mid-tier lender Dah Sing Banking Group dropped 7.37 per cent while Citic International Financial Holdings, which owns Citic Ka Wah Bank, slipped 6.58 per cent. By contrast, shares of bigger rivals Bank of East Asia and BOC Hong Kong (Holdings) fell 2.03 per cent and 0.69 per cent, respectively. HSBC Holdings rose 0.3 per cent. HKMA chief executive Joseph Yam Chi-kwong on Thursday said that some banks holding subprime-related structured products could see a decline in profit or even slip into the red under the widening fallout of the crisis in the US housing market. Analysts said that although BOCHK had exposure to subprime-related investments of just under HK$10 billion, it was better able to absorb losses because of its size. Small lenders might find it harder. 'The bank that may run a risk is Citic Ka Wah as they have bigger exposure,' said John Wadle, the co-head of Asia banking research at UBS. Mr Wadle said whether banks posted a loss still depended on how they treated the deficit from their subprime-related investment. 'If they took the charges through profit and loss, [they may occur a loss],' he said. 'If they took the charges from capital, it would only affect their book value.' BOCHK in September said its US subprime asset-backed securities fell to HK$9.6 billion last month from HK$12.8 billion a quarter ago. The lender made a provision of HK$51 million to cover possible losses. Citic Ka Wah, which holds about US$340 million in structured investment vehicles (SIV), has been downgraded by Moody's Investors Service amid concern the lender will have to make a substantial provision. SIVs, usually set up by banks or financial institutions, raise funds through issuing short-term commercial paper to finance long-term investment with higher yields. The value of these investment vehicles plunged after investors started to shun mortgage-related debt when the US subprime crisis surfaced. William Wong Kwok-wai, an analyst at BOCI Research, said Citic Ka Wah might post a loss if it wrote off all its investment in SIVs. A spokeswoman at Citic Ka Wah said the company was not in a position to comment on the bank's earnings forecast. 'The bank's core business in wholesale and retail banking continues to perform very strongly and we do not see any slowing down of business momentum,' the spokeswoman said.