{"text":[[{"start":7.25,"text":"HSBC has begun to market risky loans made by Hang Seng Bank to investors, in an early sign of how Europe’s largest lender intends to overhaul the Hong Kong bank it took full control of this year."}],[{"start":19.75,"text":"The London-based group completed its take-private of Hang Seng at the start of the year and in recent months has offered debt investors the opportunity to examine its Hong Kong subsidiary’s loan book, according to two people familiar with the process."}],[{"start":33.65,"text":"One of them said negotiations would be challenging as private debt funds would demand big discounts for the loans."}],[{"start":40.75,"text":"More than half of HSBC’s so-called stage-three commercial property loans in Hong Kong sat within Hang Seng at the end of last year, about $3.5bn out of $6.3bn total. Stage-three loans are deemed credit impaired and unlikely to be repaid in full."}],[{"start":58.1,"text":"“Our priority remains supporting our customers,” said HSBC. “We will continue to take routine action to manage the overall portfolio as part of our prudent approach to risk.”"}],[{"start":68.45,"text":"A debt sale could have ramifications for Hong Kong’s property sector, as professional debt investors tend to be more willing than banks to foreclose on borrowers who are in technical default."}],[{"start":79.35000000000001,"text":"“The market is expecting the banks to clear a lot of bad debt this year,” said a property executive. “The name of the game [for debt funds] is buy the loan, foreclose and sell it on.”"}],[{"start":90.45,"text":"The FT reported last year that Hong Kong’s de facto central bank had guided local lenders to be more flexible on distressed loans."}],[{"start":98.85000000000001,"text":"The Hong Kong Monetary Authority told the FT at the time: “Banks must ensure appropriate and timely loan classification and provisioning at all times.”"}],[{"start":109.2,"text":"HSBC first bought a controlling stake in Hang Seng, a local retail bank with a strong brand, during a financial crisis in 1965."}],[{"start":117.85000000000001,"text":"The deal turned Hang Seng into a dominant local participant and ranks among HSBC’s most strategically significant transactions. Last year, the UK bank said it would buy out minority investors to take Hang Seng private for $13.6bn."}],[{"start":133.9,"text":"At the time, HSBC chief executive Georges Elhedery denied that the decision was sparked by concerns over Hang Seng’s commercial property exposure."}],[{"start":143.55,"text":"Hong Kong’s real estate market struggled to recover after the Covid-19 pandemic, suffering several years of falling rents and rising vacancy rates."}],[{"start":153.55,"text":"HSBC said in the first quarter of this year that 63 per cent of its Hong Kong commercial property loan book was marked as bearing increased credit risk."}],[{"start":164.10000000000002,"text":"Much of the pain is in Hang Seng, which analysts said had a higher proportion of loans to smaller property developers, some of which were still struggling."}],[{"start":172.85000000000002,"text":"Hong Kong’s real estate market has experienced a K-shaped recovery this year. Prime areas of the territory such as office rentals in Hong Kong’s Central district have recovered amid a boom in initial public offerings and trading, while areas outside central business districts have seen further declines in rent and prices."}],[{"start":198.5,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1783673530_7503.mp3"}