Bulletin: Bank of China (Hong Kong) Can Handle Rising Property Stress

SINGAPORE (S&P Global Ratings) March 27, 2025--Bank of China (Hong Kong) Ltd.'s strong capitalization cushions it against increasing pressures from commercial real estate. The bank's profitability will remain resilient, especially as the pace of further interest rate cuts becomes uncertain amid the potential for U.S. tariffs to reignite inflation. We forecast the bank's return on average assets will fall slightly to 0.9% in 2026 from 1.0% in 2024. Meanwhile, we anticipate moderately slower asset growth will continue to help preserve the bank's capital buffer. BOCHK faces sectorwide pressure from its exposure to Hong Kong commercial real estate (CRE). As of Dec. 31, 2024, its nonperforming loan (NPL) ratio was 1.05% and its stage 2 loan ratio was 2.04%, worsening from

...March 26, 2025 SINGAPORE (S&P Global Ratings) March 27, 2025--Bank of China (Hong Kong) Ltd.'s strong capitalization cushions it against increasing pressures from commercial real estate. The bank's profitability will remain resilient, especially as the pace of further interest rate cuts becomes uncertain amid the potential for U.S. tariffs to reignite inflation. We forecast the bank's return on average assets will fall slightly to 0.9% in 2026 from 1.0% in 2024. Meanwhile, we anticipate moderately slower asset growth will continue to help preserve the bank's capital buffer. BOCHK faces sectorwide pressure from its exposure to Hong Kong commercial real estate (CRE). As of Dec. 31, 2024, its nonperforming loan (NPL) ratio was 1.05% and its stage 2 loan ratio was 2.04%, worsening from 1.04% and 1.23%, respectively, on Dec. 31, 2023. However, the bank's NPL ratio remained well below the industry average of 1.96% because a decline in impaired overseas loans mitigated an increase in impaired...

Bulletin