HSBC shifts HK$11 billion in loans from Hang Seng to shore up balance sheet

HSBC has bought HK$11 billion (US$1.4 billion) in loans from wholly owned subsidiary Hang Seng Bank to strengthen the unit's balance sheet amid property-related bad debts. The transfer, conducted on arm's length terms in the first half of the year, helped cut Hang Seng's impaired loan ratio to 4.6 p

HSBC has acquired loans worth HK$11 billion (US$1.4 billion) from its fully owned subsidiary Hang Seng Bank, as Hong Kong's biggest banking group moves to shore up the unit's balance sheet following investor concerns during the property slump.

The deal was "conducted on arm's length terms" in the first half of the year, according to Hang Seng's interim report in August, which did not specify the credit quality of the loans or the reasons for the transaction.

HSBC took Hang Seng private in a US$13.6 billion deal in January, at a time when the subsidiary's bad loans were mounting due to heavy exposure to Hong Kong and mainland property. Previously, HSBC had owned 63 per cent of Hang Seng, which was listed on the Hong Kong exchange.

By the end of 2025, Hang Seng's impaired loan ratio had surged to 7 per cent, far above the city's industry average of under 2 per cent. That ratio fell to 4.6 per cent in the first half of this year, driven by a HK$20 billion reduction in "stage 3" loans, the bank's lowest-quality credit category, to HK$37 billion as of end-June, according to Hang Seng's disclosures.

HSBC declined to comment on the quality of the transferred loans or whether the transaction contributed to improvements in Hang Seng's balance sheet. Hong Kong newspaper Sing Tao was first to report the deal.

HSBC's outgoing chief financial officer Pam Kaur said at an industry conference earlier this month that the group "created a capacity within Hang Seng where the non-performing loans are lower". "There is more room in the balance sheet to diversify lending beyond commercial real estate," said Kaur, who will step down in 2027.