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Thursday, Oct 22, 2020

HK banks offer relief to customers amid coronavirus outbreak

HK banks offer relief to customers amid coronavirus outbreak

StanChart and HSBC to provide liquidity support to borrowers in their biggest market
Hong Kong banks including Standard Chartered and HSBC are offering billions of dollars in relief measures to borrowers as the coronavirus outbreak threatens to deal a further blow to an economy that is already in recession.

StanChart said it would allow clients with good repayment histories to make six months of interest-only mortgage payments, and would offer a similar moratorium on principal payments for some commercial loans.

The move follows an announcement by HSBC that it would provide more than HK$30bn (US$3.9bn) in liquidity relief for businesses. This includes HK$10m in cash flow support for its trade finance customers and a moratorium on principal payments for commercial loans secured against property.

Hong Kong is the biggest single market for Standard Chartered while the Asian financial hub combined with mainland China contributed about 80 per cent of HSBC’s profit in its latest reported quarter.

HSBC’s Hong Kong chief executive Diana Cesar said the circumstances were “unprecedented” and the bank would introduce further measures for personal customers.

The blow to Hong Kong’s economy from the coronavirus follows the devastation wrought by political protests last year on the Asian financial hub’s retail and tourism industries.

The Hong Kong Monetary Authority has called on lenders to “adopt a sympathetic stance” in dealing with customers under financial stress because of the virus. The city’s financial secretary Paul Chan has warned of a further rise in unemployment because of the outbreak.

Hong Kong’s gross domestic product contracted 1.9 per cent last year.

Among other measures, Standard Chartered said it would waive service charges on online local fund transfers for three months “to reduce the need to visit a bank branch”. Banks across the city have closed branches, with many residents fearing the spread of the disease through close physical contact.

The territory’s other large banks, including Bank of China (Hong Kong), Hang Seng Bank, an affiliate of HSBC, and Bank of East Asia have announced similar liquidity relief measures for their customers.

Sonny Hsu, a Moody’s analyst, said Hong Kong banks were among the healthiest in the world in terms of capital ratios but the poor economic conditions could hurt profitability, especially in unsecured consumer lending, such as credit cards.

He said demand for loans such as mortgages would fall and businesses would be less likely to invest.

Analysts were also paying “close attention” to any possible “irrational” capital flight, Mr Hsu said. “It wouldn’t be rational for depositors to flee Hong Kong at this moment . . . but depositors and investors don’t always act rationally so it’s something we have to monitor closely,” he said.

Fitch Ratings said bank earnings would be weakened in the near term, but noted that Hong Kong banks’ financial position was strong. The average common equity tier one capital ratio for the banks Fitch rated was 16 per cent at the end of last year while the impaired loans ratio was 0.6 per cent.

Fitch also said Hong Kong and Macau banks were better insulated from property price declines than during 2003, when the city was hit by the Sars virus outbreak. “The banks navigated that period well due in part to relief measures provided to borrowers,” Fitch said.

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