Hong Kong banks suffer poor asset quality, loan growth due to coronavirus risks

Banks in Hong Kong are faced with two quarters of slow loan growth and declining asset quality due to the coronavirus outbreak’s impact on consumer banking.

The Asian financial hub, including HSBC and Standard Chartered, are experiencing low demand for mortgages, corporate loans, and credit card usage.

Hong Kong has its biggest exposure to China in Asia, accounting to 29.4% of its banking system assets in the previous year’s first half.

Some banks began to stress test areas in China and Hong Kong businesses as market fears over the virus grow.

Sonny Hsu, senior credit officer for financial institutions group at Moody’s Investors Service said that some companies in Hong Kong are “hanging by a thread” due to the recent civil unrest and the virus spread.

If economic activities continue to be disrupted by the virus’ impact, banks’ asset quality and profitability would weaken, and will become credit negative.

A senior banker at a large global bank in Hong Kong said that the trade finance volume is currently down at 15% to 30% in Hong Kong and China.