HSBC expects higher credit losses from Hong Kong property market, tariff-induced pain
HSBC's CEO continues cost-cutting measures and orders all managing directors to work from office for at least four days a week from October 1
HSBC, the largest banking group in Europe and Hong Kong by assets, expects provisions for bad debt to keep rising this year amid challenges in Hong Kong’s commercial real estate market and potential fallouts from trade tariffs and swings in global interest rates.
The UK lender, whose Asian base is in Hong Kong, and its subsidiary Hang Seng Bank, made a combined US$500 million in provisions on offices and retail properties in Hong Kong in the first half, according to its results published on Wednesday. That was five times the amount a year earlier.
“We are seeing continued challenges in some of the office commercial real estate in Hong Kong,” CEO Georges Elhedery said during an online media briefing after the announcement. “That is mainly due to an oversupply, resulting in downward pressure on rentals and capital values.”
The lender expects charges related to credit losses in 2025 to rise to 40 basis points as a percentage of average gross loans – the top end of the 30 to 40 basis point range it predicted in April. The spread was 36 basis points in 2024 and 32 basis points in 2023, according to its exchange filings.
“During the short term, some of our borrowers are facing challenges and we are here to support them,” Elhedery said. “We are encouraged by the additional government actions that have been taken to limit land supply, which will ultimately support this market in the medium term.”