Inside Hong Kong’s biggest banks, the mood in late October 2019 was calmer than the street scenes suggested. Protesters had been out for months, and tear gas and the occasional burning Starbucks were part of the city’s backdrop. The quarterly results from HSBC Holdings and Standard Chartered still showed business holding up.
HSBC, the London-based lender with more of its fortunes tied to Hong Kong than almost any global bank, reported third-quarter results on Monday. Adjusted pretax profit from Hong Kong rose 1 per cent in the quarter to US$3 billion. The bank also took a US$90 million credit charge because the local outlook had dimmed, especially for small and medium-sized businesses. It described its Asian operations as resilient.
Standard Chartered said it earned more in Hong Kong too. “Business is actually continuing to perform pretty well,” chief financial officer Andy Halford told Bloomberg Television on Wednesday. “Maybe not growing quite as much as it’d have done previously, but absolutely still growing.”
Is money leaving?
Some ultra-wealthy HSBC clients are drawing up contingency plans to park cash elsewhere, the bank said, but very little has actually moved. Hong Kong Monetary Authority Chief Executive Eddie Yue told a briefing on Thursday that the city had seen no significant capital outflow.
Halford said some Standard Chartered clients have asked about opening accounts elsewhere. Not many, he said, and the bank could serve them from other locations anyway.
K C Chan, the city’s former secretary for financial services and the treasury, saw no reason to expect Hong Kong to lose standing. “It would take a huge structural change,” he said in an interview. His reasoning: the markets are doing well because they serve China’s economy. “Has this changed? No.” And money does not leave overnight. “If you have your liquidity here in Hong Kong, you won’t just move your money to Singapore in a flick.”
Local banks face more strain
The picture is harsher for lenders that serve residents and small businesses. The demonstrations have disrupted commerce and discouraged tourism, tipping the city toward a technical recession. Falling home prices, office rents and retail sales threaten to push up credit costs. Capital outflow and intervention by the monetary authority could squeeze net interest margins.
A JPMorgan Chase stress test estimated that lenders such as Hang Seng Bank and Bank of East Asia could see earnings drop 24 per cent to 45 per cent next year and 39 per cent to 67 per cent in 2021.
Halford was more upbeat about the longer run. “If you look back in history there have ebbs and flows in Hong Kong and it has a proven track record of resiliently coming through difficult situations,” he said. “Our hope and our belief is that over a period of time it will plow through this.”
Sources
Sources
- Banks in Hong Kong condemn violence, urge restoration of …
- Hong Kong banking giants defy dire predictions amid protests
