Hong Kong banks’ collateral asset valuations to continue declining in 2026: S&P



The value of collateral assets used by banks for commercial property loans is expected to continue declining in 2026, according to S&P Global Ratings, as the sector has yet to find a clear bottom.

“More collateral pain is likely this year for Hong Kong banks,” the credit rating agency said in a report published on Thursday, adding that a subset of small banks could face more acute strain.

That assessment comes as Hong Kong’s commercial property market remains on a sustained downturn that started in 2019, as rents continue to fall and vacancy rates soar.

The Bank of East Asia, Hong Kong’s sixth-largest bank by total assets, recently disclosed a HK$723 million (US$92.4 million) valuation loss in its total investment properties in 2025, rising sharply from HK$145 million in 2024.

That illustrated the ongoing pressure on collateral valuations, according to S&P.

The ratings firm tested two stress scenarios: a 30 per cent discount to collateral and a worst-case scenario of a 50 per cent discount. The second scenario was based on recent sales of commercial properties in the secondary market, where owners sold them at around 50 per cent less than what they originally paid.

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