HANG SENG BANK: Commercial real estate in Hong Kong accounts for 16% of the total loan amount and will continue to support the development of this industry

According to the latest information from the Wise Finance APP, Hang Seng Bank (00011) saw its non-performing loan ratio rise to 5.32% by the end of June this year, an increase of 2.49 percentage points from the end of last year. Hang Seng's Executive Director and CEO, Shih Ying Yan, stated that the high interest rate environment has brought financial pressure to some of the bank's Hong Kong commercial real estate clients, inevitably leading to an increase in the non-performing loan ratio. However, she expressed confidence in the Hong Kong economy, emphasizing that real estate is an important pillar of Hong Kong's economic development. In the past, Hang Seng has supported the development of commercial real estate through different economic cycles and will continue to do so.

Hang Seng's Risk Monitoring and Compliance Director, Cheung Ka Wai, mentioned that the bank has always taken a cautious and forward-looking approach to risk management. Two-thirds of non-performing loans from Hong Kong commercial real estate clients have collateral provided. She emphasized that the current Loan-to-Value (LTV) ratio remains healthy, with default LTVs below 60% classified as lower risk and substandard LTVs below 50%. The remaining one-third of non-performing loans without collateral come from listed companies, with diversified income sources and good credit performance. 90% of these loans are investment-grade. Cheung stressed that Hong Kong commercial real estate is not the main driver of the bank's Expected Credit Losses (ECL), and the ECL for Hang Seng is expected to be lower than last year. She also revealed that the loan portfolio related to Hong Kong commercial real estate amounts to HKD 140 billion, accounting for 16% of the bank's total loans.

Cheung noted that ECL related to mainland Chinese commercial real estate is expected to peak before 2022, with no significant defaults occurring this year. All related loans are fully collateralized, and a more cautious risk management approach will be implemented.

Shih Ying Yan mentioned that Hang Seng expects the US to cut interest rates one to two times in the second half of the year, which will be beneficial for the economy. This move can ease clients' cash flow pressure, stimulate economic activity, and forecast a 2.8% GDP growth for Hong Kong this year. She highlighted that global investments are shifting, supply chains are being rebuilt, which may have short-term economic impacts. However, Hang Seng Bank is diversifying its investments and actively exploring other markets such as the Greater Bay Area and the Middle East. She believes that the number of clients, financial management business, and the Greater Bay Area market will grow in the future.

Hang Seng announced a second interim dividend of HKD 1.2 per share, with a total dividend of HKD 2.4 for the first half of the year, a 9% increase year-on-year. Chief Financial Officer, So Suet Ping, mentioned that the HKD 3 billion share buyback plan will be completed by September this year. The bank's capital position is robust, and after completing this buyback plan, various strategies will be considered to provide long-term returns to shareholders