Hong Kong’s banks face at least two quarters of worsening asset quality and slowing loan growth as the coronavirus outbreak hits trade and consumer banking, analysts and bankers said.
Lenders in the Asian financial hub, including HSBC Holdings PLC and Standard Chartered PLC, are seeing a drop in demand for mortgages, credit card usage and corporate loans, bankers with knowledge of the matter said.
Hong Kong banks have Asia’s largest exposure to China, which accounted for 29.4 percent of banking system assets in the first half of last year, credit ratings agency Fitch says.
Some of the banks have already started stress testing select parts of their China and Hong Kong businesses as fears grow of a pandemic of COVID-19 that originated in China late last year.
“Some of the companies in Hong Kong were already hanging from a thread after months of civil unrest and now the virus has come on top of that,” Moody’s Investors Service financial institutions group senior credit officer Sonny Hsu (徐嵩宜) said.
“The combined effect will be much more. This time, it will be more of a problem loan and credit cost issue,” Hsu said.
An extended disruption to economic activities would weaken the banks’ asset quality and profitability, and would be a credit negative, the rating agency said.
“[The] first quarter is usually a busy month for us as clients work on their plans for the year ahead. This year, the trade finance volume is down 15 percent to 30 percent in China and Hong Kong,” a senior banker at a large global bank in Hong Kong said.
The biggest impact on asset quality in Hong Kong would come from retail, hotels and property as the territory’s economy, already in recession after months of pro-democracy protests, faces increased headwinds from the virus outbreak, the banker added.
Some banks are also concerned about the likely push from Chinese authorities to extend loan repayment periods as well as make cheaper credit available, the bankers said.
“We are not thinking about origination of new business much — [the] bulk of work is focused on minimizing the hit to asset quality. It won’t be business as usual for the next two quarters at least,” a retail banker with a global bank said.
Unemployment in Hong Kong reached its highest in three years last month at 3.4 percent, while bankruptcy petitions submitted rose to 703 last month up from 665 a year ago, data showed.
HSBC, which made 40 percent of its revenue from China and Hong Kong last year, said last week it could take up to US$600 million in additional provisions against loan losses if the outbreak persists into the second half.
Bank of East Asia (BEA, 東亞銀行) on Wednesday last week said that it expected a deterioration of 10-20 basis points in credit cost, the percentage of provisioning for bad loans out of total lending, for its local business this year due to the economic downturn.
Taiwan Transport and Storage Corp (TTS, 台灣通運倉儲) yesterday unveiled its first electric tractor unit — manufactured by Volvo Trucks — in a ceremony in Taipei, and said the unit would soon be used to transport cement produced by Taiwan Cement Corp (TCC, 台灣水泥). Both TTS and TCC belong to TCC International Holdings Ltd (台泥國際集團). With the electric tractor unit, the Taipei-based cement firm would become the first in Taiwan to use electric vehicles to transport construction materials. TTS chairman Koo Kung-yi (辜公怡), Volvo Trucks vice president of sales and marketing Johan Selven, TCC president Roman Cheng (程耀輝) and Taikoo Motors Group
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
RECORD-BREAKING: TSMC’s net profit last quarter beat market expectations by expanding 8.9% and it was the best first-quarter profit in the chipmaker’s history Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), which counts Nvidia Corp as a key customer, yesterday said that artificial intelligence (AI) server chip revenue is set to more than double this year from last year amid rising demand. The chipmaker expects the growth momentum to continue in the next five years with an annual compound growth rate of 50 percent, TSMC chief executive officer C.C. Wei (魏哲家) told investors yesterday. By 2028, AI chips’ contribution to revenue would climb to about 20 percent from a percentage in the low teens, Wei said. “Almost all the AI innovators are working with TSMC to address the
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”