By Anshuman Daga and Lawrence White
SINGAPORE (Reuters) -HSBC Holdings PLC Group CEO Noel Quinn indicated on Tuesday that China's commercial property sector was on the mend, after the bank booked higher-than-expected charges in the fourth quarter linked to its exposure to developers.
"The sentiment in the fourth quarter was more negative than the sentiment that emerged in January," Quinn told Reuters in an interview, adding there were positive developments both on the demand side and the supply side linked to significant policy measures.
His comments came after Europe's biggest bank reported a 92% surge in quarterly profit and pledged more regular dividends and share buybacks.
Still, HSBC (LON:HSBA) said expected credit losses nearly trebled to $1.4 billion in the fourth quarter, impacted by charges related to its $16.8 billion exposure to China's commercial real estate sector and companies in Britain. This was higher than market expectations of $1.05 billion.
China's property sector, which accounts for a quarter of the economy, was badly hit last year as cash-squeezed developers were unable to finish apartment construction, prompting a mortgage boycott by some buyers.
Analysts expect rate cuts and other measures announced by China to kick start a recovery in the sector towards the second half of this year, while data shows the market is stabilising.
"On the demand side, the re-opening of China post COVID is going to create increased demand over time for commercial real estate. On the supply side, there were some big policy measures announced in early January to provide additional liquidity to the commercial real estate sector," Quinn said.
"So encouraging signs in early January. We think that will be positive for the sector, but we thought it wise to take some additional provisions at the end of December. We have a more positive outlook now," he said.
Last week, Standard Chartered (LON:STAN) flagged a challenging outlook for China's real estate sector and said it expected a "protracted recovery." It said it had minimal exposure to mortgages on buildings under construction.
StanChart's statutory credit impairment charges more than doubled to $227 million in the fourth quarter from a year earlier and the charges includes $130 million for exposure to China real estate, among others.