HSBC facing major slowdown of key Hong Kong business
HSBC Holdings
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09:20 23/04/24
HSBC's pivotal Hong Kong arm faces losing corporate and retail banking market share to 'virtual banks', Citigroup warned on Tuesday, with loan growth potentially falling off a cliff in the third quarter.
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Citi, which downgraded HSBC shares to 'neutral' from from 'buy' with a target price of 660p, pointed out that lending in Hong Kong has been dropping due to the slowdown in mainland China, exacerbated by the depreciating yuan and concerns about the US trade war.
Similar to many incumbent banks, HSBC has lost market share in Hong Kong, with its share of the loan market dropping to 23% in the first half of the year versus 27% in 2005, with the share of the deposit market down to 29% from 33%.
"Previously market share loss has been in corporate banking; looking ahead, we worry about retail banking disruption from virtual banks," the analysts wrote in a note to clients.
Third-quarter loan growth "could be negative" compared to the second, they said, with HSBC Asia, which accounted for more than three-quarter of HSBC’s first-half underlying profit before tax, forecast to see loan growth in 2018 judder to 6% from the 17% last year.
"What happens in HK matters directly for HSBC - and indirectly if Asia more broadly follows (e.g. slower loan growth)."