Financial pressures in China’s property sector could linger, according to HSBC which set aside funds to cover potential risks.
HSBC recorded $1.1 billion in expected credit losses (ECL) and other credit impairment charges in the third quarter, according to the bank’s financial results, in line with the same period last year. Year-to-date, the bank recorded $2.4 billion in ECL charges, up around $200 million.
China’s commercial real estate sector was prominently featured, accounting for $500 million in charges for the third quarter and $800 million overall in the first nine months of 2023.
Negative Outlook
According to HSBC, mainland China’s commercial real estate sector continued to deteriorate in 2023 as a rebound failed to materialize following government measures introduced in late 2022. New measures announced in August 2023 have also not yet translated into a «meaningful rebound» in fundamentals.
«While improved sentiment should eventually increase residential transaction levels and improve developers‘ financial conditions, any recovery is likely to be prolonged, particularly in the absence of direct fiscal stimulus and while financing conditions remain constrained,» the bank said.
«There also remains the potential for a further deterioration in credit conditions during the last three months of the year given the continued uncertainty around liquidity support for state-owned enterprises and ongoing weakness in property market fundamentals. Borrowers are therefore subject to a high degree of performance uncertainty and offshore refinancing risk.»
