HSBC Holdings Plc (0005.HK) faces a surge in non-performing loans (NPLs) in Asia amid rising risks in emerging markets, JPMorgan Chase said, downgrading the stock to “underweight” from “neutral”.
HSBC’s bad loans in the region may more than double to US$5.4 billion by year-end from US$2.2 billion in June, JP Morgan analysts said in a note Wednesday, Bloomberg News reported.
In a worse-case scenario, the lender’s NPLs in the region could rise to as much as US$15.3 billion, the analysts were quoted as saying.
“With the rising probability of an emerging-market credit cycle likely to be priced into bank valuations, we expect HSBC to underperform relative to European banks,” JP Morgan said.
“Given Asia is the largest component of HSBC’s emerging market exposure and that non-performing loans are rising, we believe that provisions are likely to pick up.”
HSBC has US$273 billion of direct lending exposure to Greater China, including US$74 billion lent to commercial real estate and US$95 billion of mortgages, according to JP Morgan.
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