Nanyang Commercial Bank still weighed down by property risks in 2025

The de-risking process is expected to take a longer time, Moody’s said.

Nanyang Commercial Bank (NYCB) asset quality will continue to face pressure for the next 12-18 months from its property exposures in mainland China and Hong Kong, according to Moody’s Ratings.

Its impaired loan ratio has risen to 2.81% in end-2024, from 2.32% in end-2023, due to mainland property.

“Although the bank has been downsizing its mainland property exposures through write-offs and disposals, we expect the de-risking process to take a longer time amidst the prolonged sector downturn. This means the associated asset risk will continue to weigh on the bank's asset quality,” the ratings agency said in its June 2025 ratings report on the bank, where it changed its outlook for NYCB from stable to negative.

The bank’s Hong Kong commercial real estate (CRE) exposure faces elevated asset risk due to the deterioration in borrowers’ debt servicing capacity under the challenging property sector environment, Moody’s said.

Property development and investment loans in Hong Kong accounted for 10.4% of NYCB’s gross loans.

“We expect NYCB to continue making loan loss provisions in 2025 as it resolves mainland property loans,” Moody’s said.

Despite the property risks, NYCB is expected to maintain good capitalisation over the next 12-18 months on the back of “soft risk weighted assets growth in 2025.”

The bank has been improving its capitalisation since 2022 and continues to manage down its loan book and reweight its exposure to lower-risk assets such as sovereign bonds, Moody’s said.

NYCB's moderate profitability will be strained by an expected narrower net interest margin (NIM) and elevated credit costs over the next 12-18 months.

The bank's NIM is likely to narrow moderately in 2025 because of the decline in market rates in Hong Kong and the low interest rate environment in mainland China.