Evergrande: Hong Kong banks report third-quarter results as concerns swirl over world’s most indebted developer

HSBC, Standard Chartered previously said they have little to no direct exposure to Evergrande

About 45 per cent of Hong Kong bank loans are deployed to Chinese entities for use in the mainland, according to Citigroup

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The HSBC and Standard Chartered buildings are illuminated in Hong Kong. HSBC kicks of the third-quarter earnings season on Monday. Photo: Bloomberg

Published: 8:30am, 25 Oct 2021Updated: 6:35am, 26 Oct 2021

Investors will be looking for any warning signs in the mainland lending portfolios of Hong Kong’s banks as they prepare to report their third-quarter results against the backdrop of rising concerns about China Evergrande Group’s debt crisis and its potential effects on China’s property sector.

HSBC will be the first of the city’s three currency-issuing banks to update investors on its third-quarter performance on Monday, followed by Bank of China (Hong Kong) on Friday and Standard Chartered on November 2.

Other big banks with operations in the city that are expected to report their results in the coming weeks include Singapore’s DBS Group Holdings and Oversea-Chinese Banking Corp, the parent of OCBC Wing Hang, as well as the Hong Kong arms of Bank of Communications, China Construction Bank and Industrial and Commercial Bank of China (ICBC).

“Liquidity events in the China property sector should have limited direct impact, although we remain watchful of any second-order impact,” Citi analyst Yafei Tian said in a research note.

About 45 per cent of loans by the city’s banks are deployed to Chinese entities for use in the mainland, Tian said. However, the banks are still likely to beat forecasts for provisions on soured loans in the third quarter, she said.

Evergrande, China’s biggest residential home builder by sales last year, is struggling under the weight of US$305 billion in total liabilities following years of expansion beyond its core property businesses and concerns about its ability to repay its massive debt load are roiling financial market globally.