HSBC bolsters Hang Seng balance sheet with $1.4 billion loan transfer

By Selena Li

Sept 29 (Reuters) - HSBC HSBA.L has acquired loans worth HK$11 billion ($1.4 billion) from fully owned subsidiary Hang Seng Bank, as Hong Kong’s biggest banking group seeks 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 didn’t specify the credit quality of the loans or the reasons for the transaction.

HSBC took Hang Seng private in a $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% 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%, far above the city's industry average of under 2%.

That ratio fell to 4.6% 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.

($1 = 7.8446 Hong Kong dollars)