HSBC Holdings has taken the unusual step of getting directly involved in pushing its Hong Kong subsidiary, Hang Seng Bank, to offload portfolios of bad real estate debt, underscoring growing concerns over the city’s struggling property sector.
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About two months ago, the lender directed its London-based global chief corporate credit officer and the head of its special credit unit to ensure Hang Seng started a process of selling portfolios, according to people familiar with the matter, who asked not to be named while discussing private deliberations.
The push showed results, with Hang Seng Bank now in the early stages of selling a series of property-backed loan portfolios worth more than US$3 billion, the people said. The move came after Hang Seng saw an 85 per cent year-on-year jump in impaired Hong Kong real estate loans.
The Hong Kong banking sector is facing strains from the worst real estate slump since the Asian financial crisis in the late 1990s. Discussions have even taken place in the sector about creating a “bad bank” to take over the soured loans, which Fitch Ratings estimated at about US$25 billion, based on Hong Kong Monetary Authority (HKMA) data.
Hang Seng Bank, which is about 63 per cent owned by HSBC, had impaired loans to Hong Kong commercial real estate of HK$25 billion (US$3.2 billion) as of June.
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“All banks constantly look to optimise their credit portfolio, manage their risks and take decisions that carefully consider the impacts on their customers,” an HSBC spokesperson said in a statement. “Hang Seng takes its own decisions under its own governance.”