HSBC, Standard Chartered, Hang Seng Bank and BEA set aside a combined US$1.02 billion to cover for Chinese property sector risks

Time will tell as to whether that sector has more losses coming or not, says HSBC CEO

While profitability at larger lenders HSBC and Standard Chartered was not hurt by the provisions, it declined 16 per cent at Hong Kong and China-focused Hang Seng Bank

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The HSBC headquarters in Hong Kong. The bank took a US$500 million charge for potential soured loans in its Chinese commercial real estate portfolio for the fourth quarter of 2021. Photo: Sam Tsang

Published: 8:30am, 28 Feb 2022Updated: 8:40am, 28 Feb 2022

Hong Kong lenders HSBC, Hang Seng Bank, Standard Chartered and Bank of East Asia (BEA) set aside at least US$1.02 billion last year to cover for risks arising from China’s real estate sector.

The provisions at these four banks, revealed during results announcements over the past two weeks, hint at the impact the developers’ credit crunch has had on lenders.

HSBC, the city’s biggest lender, took a US$500 million charge for potential soured loans in its Chinese commercial real estate portfolio for the fourth quarter, while Standard Chartered made a US$94 million provision.

“There was no doubt that, in the fourth quarter, the level of market uncertainty increased and the level of contagion risk on that whole sector of commercial real estate in China increased relative to the second or the third quarter,” Noel Quinn, HSBC’s CEO, said in an analyst briefing last week.

‘We’ve seen the market conditions ease a bit at the start of 2022. We think that is likely to have a benefit on the risk position on commercial real estate in China,’ says HSBC’s Noel Quinn. Photo: Agence France-Presse

China’s property developers have had to live with a liquidity crunch since Beijing started a crackdown on the sector mid last year. As a result, major home builders such as China Evergrande Group, Fantasia, Modern Land and Kaisa Group Holdings defaulted on offshore debt last year. And others, such as China Aoyuan Group and Yuzhou Group, have joined this list in 2022.

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