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- Some lenders, becoming wary of China Evergrande Group's (OTCPK:EGRNF) debt load, are putting brakes on new lending tied to the real estate developer's unfinished residential properties in Hong Kong.
- HSBC Holdings (HSBC +2.2%), Bank of China's (OTCPK:BACHF) Hong Kong unit, Hang Seng Bank (OTCPK:HSNGY) and Bank of East Asia (OTCPK:BKEAY) stopped providing mortgages to buyers of Evergrande's unfinished residential properties in Hong Kong, Bloomberg reports, citing people familiar with the matter. That "could be a fresh sign banks are protecting themselves as they've increasingly worried about Evergrande," Bloomberg Intelligence analysts Daniel Fan and William Hau write in a note.
- The lenders suspended new mortgages for two projects under construction after reconsidering the risks associated with the loans, Bloomberg reports.
- Industrial and Commercial Bank of China (OTCPK:IDCBY) (Asia) also halted providing mortgages to Evergrande unfinished apartments, South China Morning Post reported.
- China's top financial regulator instructed Evergrande's founder Hui Ka Yan at the end of June to solve his company's debt problems as quickly as possible and emphasized the need to avoid major economic shocks, Bloomberg said.
- The price action of Evergrande shares has been ugly, falling 28% this month, while several of its dollar bonds have fallen to record lows.
- Evergrande's "2025 dollar note sank by about 6 cents on Wednesday to 49 cents on the dollar, suggesting investors are bracing for a potential default," according to Bloomberg.
- In its defense, the real estate developer says it still has good relationships with many banks in Hong Kong and contends that its local business won't be affected, according to a written statement to Bloomberg.
- See how Evergrande's long-term debt increased in recent years in chart below.
- Earlier last month, the People's Bank of China lowered the required reserve ratio in order to increase liquidity for lenders in the banking system and to suppress interest rates.
