Latest news with #bad bank
Reuters
2 days ago
- Business
- Reuters
Breakingviews - A bad bank for Hong Kong is far from unthinkable
HONG KONG, July 21 (Reuters Breakingviews) - For one of the world's most expensive and property-obsessed cities, the mere mention of creating a bad bank for real estate debt is enough to cause a shudder. That's why the Hong Kong Monetary Authority on Friday was quick to dismiss reports, opens new tab that lenders are mulling such a plan. But it's far from unthinkable. Sure, systemic risks look limited for now. Bad loans from all sectors of the city's economy stood at $25 billion at the end of March, amounting to just 1.98% of the banking system's total, according to the HKMA's statistics. And the provision coverage ratio stands at more than 140%. That's despite a 30% decline in home prices from their 2021 peak. The valuation of commercial real estate (CRE) has probably fallen more, although the slump has not been fully factored into developers and banks' books given there have been no notable fire sales. An extended real estate slump would change that. At the end of March there were some HK$1.4 trillion ($180 billion) of CRE loans in Hong Kong. In a September report, Goldman Sachs analysts argued that a 25% decline in developers' 2023 pre-tax earnings could push the non-performing ratio for that debt up to 22%, surpassing the 1998 Asian financial crisis peak of 17%. That may sound like an unlikely dire scenario. But six of 11 smaller developers tracked by Jefferies analysts have posted negative EBIT, excluding fair value changes, since 2024, and carry HK$173 billion in debt. One of them, Emperor International ( opens new tab, defaulted on HK$16.6 billion of borrowings last month. Add in unlisted property investors and New World Development ( opens new tab, which secured a $11 billion refinancing deal in June, and up to 30% of CRE loans in the banking system could be at risk of downgrade, per Jefferies. New World, whose new loans are due in just three years' time, is in talks to sell a giant airport mall at a 25% loss against its HK$20 billion investment, Bloomberg reported, opens new tab last week, citing people familiar with the matter. Such disposals will up the pressure on lenders. For instance, the $30 billion Hang Seng Bank ( opens new tab - majority-owned by HSBC - has 36% of its book allocated to Hong Kong properties. Its problem loans already stand at 6.12% of its overall portfolio. The lender was one of those involved in a mooted plan to create a bad bank, per Bloomberg. Despite the HKMA's denial, it's likely to become a more frequent topic of discussion.
Bloomberg
4 days ago
- Business
- Bloomberg
Spain's Bad Bank to Start Sale of €1.5 Billion in Soured Loans
Spain's bad bank plans to sell a portfolio of about €1.5 billion ($1.75 billion) in soured loans. Sareb, as the state-controlled asset manager is known, and advisors have approached investors to offer the portfolio, named Project Florencia, a company spokesperson said in response to Bloomberg questions. The loans are unsecured and offers are expected after August.
South China Morning Post
5 days ago
- Business
- South China Morning Post
HKMA dismisses ‘bad bank' rumours, saying industry remains healthy
The Hong Kong Monetary Authority (HKMA) , the city's de facto central bank, said it had no plans to establish a 'bad bank' to absorb troubled debt in the financial system, saying that the local banking sector remained healthy and profitable. Advertisement 'Overall, banks in Hong Kong maintain a healthy balance sheet; their credit risk is manageable and provisions are sufficient,' the authority said in a statement on Thursday. 'The HKMA has no intention to set up the rumoured 'bad bank'. We understand that the relevant banks also do not have such a plan.' The banking regulator saw no need to create a bad bank, as the current provisions for bad debts at banks were already sufficient, an HKMA representative added. The HKMA's statement came hours after a Bloomberg report, citing unnamed sources, indicated that Hang Seng Bank, Bank of Communications, and other lenders were in discussions about creating a bad bank. A bad bank is typically set up to buy non-performing loans and other bad debts to clean up the balance sheets of another bank. The logo of Hong Kong Monetary Authority is seen at its office in Central. Photo: Yik Yeung-man The Bloomberg report, citing Fitch Ratings estimates, said that soured loans in Hong Kong climbed to US$25 billion at the end of March, representing 2 per cent of the total and reaching a two-decade high.
