Ratings agency Fitch has published a report that has a negative view of the prospects of banks in Hong Kong, reflecting the adverse factors brought about by the economic slowdown
The ongoing social conflict in Hong Kong and the tension between China and the United States have affected corporate confidence, the real estate market and loan demand. The above uncertainty will reduce the risk appetite of banks as they expand. Due to the modest growth in loans, lower fee income, and higher credit costs, it is expected that the profitability of banks will be slightly weakened, but a lower interest rate environment can reduce bank capital costs.
Refers to social conflicts affecting business confidence
In October this year, the government eased property price restrictions on borrowing mortgage insurance. In addition to the low interest rate environment, Fitch believes that in the short term, property prices and the risks of bank collateral can be reduced. However, the Hong Kong economy has weakened. More provisions need to be made.
In addition, although the economies of Hong Kong and China are slowing down, and the yuan is depreciating, which may lead to slowing of cross-border loan demand and wealth management activities, Fitch believes that China-related loans of Hong Kong banks will still be the growth of local banks’ income. The main motivation. Although the growth rate will depend on China’s economic prospects and credit conditions, the bank expects that these loans can support the overall growth of the industry, thereby offsetting the negative impact of local factors.
However, Fitch believes that the bank’s rating outlook in Hong Kong is stable, and the bank’s issuer default rating (IDR) and viability rating (VR) have shown that the bank is capable of coping with increasing operating challenges
Thanks to strong revenue performance, cost control and strong reserves, the bank expects the bank’s key financial indicators to remain within acceptable limits. The bank also believes that the bank’s capital and liquidity situation will not change much, and there will be sufficient funds to maintain the linked exchange rate.