Hong Kong challenges manageable for banks, says S&P

October 29, 2019

HONG KONG -- S&P Global Ratings said today that political risks brought about by the social unrest in Hong Kong are likely to be manageable for the banking sector. S&P says its Banking Industry Country Risk Assessment (BICRA) for Hong Kong is therefore unaffected.

"We believe the protests have eroded social cohesiveness and weakened public support for Hong Kong's political and civil service institutions," the global ratings agency says, adding that in its opinion, weakening institutional capacity and policymaking could lower Hong Kong's resilience against adverse economic developments. 
"Counterbalancing this is our expectation of a mild and orderly correction in property prices amid a slowdown in credit growth," S&P says.
 "We expect credit losses in the banking sector to increase moderately, and asset quality to weaken.
 "However, they should remain low and manageable in the global context, even with a significant deterioration in the economic outlook for Hong Kong."
 S&P Global Ratings last month revised its forecast for Hong Kong's GDP growth to 0.2% in 2019 and 1.6% in 2020, from 2.2% and 2.4%, respectively. These revised GDP growth forecasts are significantly lower than the 3% recorded in 2018.
 "Hong Kong's recent policy announcements on supporting small and midsize enterprises and residential mortgages could provide some cushion for the economy," S&P says.
 "At the same time, we do not expect the banking sector to materially relax its underwriting standards. We consider Hong Kong's banking industry risk to be the lowest among its peers, mainly aided by prudent regulations and
proactive supervision.
 "Any weakening in supervision or relaxation in underwriting in comparison to global standards could weigh on our assessment of industry risk." www.standardandpoors.com (ATI).