Banking system credit growth to outpace nominal GDP growth in 2017

Banking system credit growth to outpace nominal GDP growth in 2017

August 11, 2017

Expect a further increment in corporate and household obligation.

Despite the fact that Hong Kong’s systemwide credit development was modest all through the greater part of 2016, loan demand climbed unequivocally from the final quarter of 2016 onwards. Moody’s expects banking system credit growth to physically outpace nominal Gross Domestic Product growth in 2017, prompting further increment in corporate and household obligation.

Here’s addition from Moody’s:

We anticipate that loan growth will normal a mid-teens percentage point rate in 2017, up from 6.5% of from 2016. Both loans for use in Hong Kong and outside Hong Kong are probably going to drive general overall loan growth, while trade finance demand ought to remain moderately steady.

The bounce back in credit growth will imply a further ascent in private sector leverage, which rose to a record high of 214% with respect to Gross Domestic Product as of March 2017. The ascent in leverage has been wide based: bank loans stretched out to corporates expanded to 146% as of March 2017 from 94% toward the finish of 2009, while those reached out to household rose to 67% from 55%.

The surge in corporate use is reflected in proceeded with ascent of debt/equity and debt/EBITDA ratios among recorded organizations. Some corporate borrowers will confront heavier debt servicing burden if there is a speedier than-anticipated ascent in interest rates or a drop-in cash flow.

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