“More collateral pain is likely this year for Hong Kong banks,” the credit rating agency said in a report published on Thursday, adding that a subset of small banks could face more acute strain.
That assessment comes as Hong Kong’s commercial property market remains on a sustained downturn that started in 2019, as rents continue to fall and vacancy rates soar.
That illustrated the ongoing pressure on collateral valuations, according to S&P.
The ratings firm tested two stress scenarios: a 30 per cent discount to collateral and a worst-case scenario of a 50 per cent discount. The second scenario was based on recent sales of commercial properties in the secondary market, where owners sold them at around 50 per cent less than what they originally paid.
