HSBC China’s asset quality, profitability stable: Moody’s

The bank has a track record of sound asset quality, the ratings agency said.

HSBC China is expected to maintain steady asset quality, capitalisation, profitability, and liquidity.

Profitability is expected to remain stable over the next 12-18 months.

It has maintained a track record of sound asset quality despite its nonperforming loan (NPL) formation rising in 2024, said Moody’s Ratings in its latest report of the bank, where it affirmed HSBC China’s A2 deposit ratings and stable outlook.

Despite an uptick in 2024, NPL formation has remained below the industry average, Moody’s said. HSBC China’s NPL ratio was 0.36% as of 31 December 2024, compared with 0.16% a year earlier.

The NPL coverage ratio was 422.26% as of 31 December 2024.

Net income/tangible assets is expected to be around the 2023-2024 average level of 1%, as narrowing net interest margins (NIM) is likely to be offset by higher investment income and lower credit cost, Moody’s said.

Funding structure is expected to remain modest with reliance on less-stable funds, mitigated by ample liquidity to cover short-term cash outflows, the ratings agency added.