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Fitch: CN & HK Banks' Credit Outlook Exacerbates; Asset Quality Risks in HK Commercial Properties Linger
Recommend 19 Positive 41 Negative 27 |
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The credit outlook for the banking sector in both mainland China and Hong Kong exacerbated due to slower economic growth, feeble retail credit demand and continued pressure on key sectors such as real estate, said Grace Wu, Head of Greater China Banks at Fitch Ratings today (22nd). NIMs are still under pressure, although falling interest rates are providing some relief from climbing impaired loan ratios. According to Wu, Chinese banks are facing a persistent headwind as government initiatives to boost economic development has prompted further narrowing of NIMs, affecting profitability and capital retention. While reductions in the statutory reserve requirement ratio (RRR) and deposit rates could alleviate the pressure on NIMs, reviving credit demand may be a challenge. The pressure on the real estate market in mainland China will sway consumer confidence. Lower lending rates should ease repayment burdens, while regulatory incentives for developers and SMEs will mitigate short-term default risk and recognition of impaired loans. The impact of narrower interest rate spreads in Hong Kong's banking sector may not be fully offset by loan growth, as interest rate differentials between mainland China and Hong Kong remain wide, which dampens loan demand. As the interest rate cuts are unlikely to provide instant and considerable relief for potential macro challenges, pressure on Hong Kong commercial real estate (CRE) earnings and asset quality risks will linger. AAStocks Financial News |
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