One of the "big three" credit rating agencies works out how moves by banks to take some pressure off mortgage borrowers and businesses will work in mitigating the impact from the virus outbreak.

Moves by banks in Hong Kong and Macao - such as ICBC and HSBC to help residential mortgage and SME borrowers - should alleviate near-term profit pressures caused by disruptions from the deadly coronavirus, according to the international credit agency, Fitch Ratings.

The agency has a stable rating outlook on Hong Kong’s banks, underpinned by their sufficient capital and liquidity buffers or parental support, in spite of their negative sector outlook, which has reflected profitability pressures from weaker economic growth since the beginning of 2019, Fitch said in a note. 

The agency said that Hong Kong's GDP probably contracted by 1.5 per cent in 2019 and China's GDP growth will probably slow to 5.2 per cent -5.7 per cent from a baseline of 5.9 per cent in 2020, depending on the speed at which the virus is contained. 

“Hong Kong's operating environment is likely to deteriorate further the longer the outbreak persists, thereby increasing the prospect of negative action on the bank's viability ratings. On the other hand, Fitch's rated Macao banks have issuer default ratings that are driven by institutional support from their ultimate parents in China and Singapore, whose rating outlooks are also stable,” Fitch continued. 

HSBC has announced that it will provide more than HK$30 billion ($3.9 billion) in additional liquidity relief to Hong Kong businesses pressured by the effects of the coronavirus outbreak. On Saturday, ICBC Asia, part of Industrial and Commercial Bank of China, joined the ranks of lenders who will help business owners. Bank of China Hong Kong, Bank of East Asia, China Citic Bank International, Hang Seng Bank, a subsidiary of HSBC, and Standard Chartered have said that they would undertake measures to help consumers and small business owners (source: South China Morning Post, others). 

“Hong Kong banks are still well-positioned to meet the conflux of operational and financial challenges. The average common equity Tier 1 and impaired loan ratios across Fitch's rated portfolio were estimated at around 16 per cent and 0.6 per cent, respectively, at end-December 2019,” Fitch said.

The agency thinks that Hong Kong and Macao banks are more insulated from declines in property prices than they were during the SARS period [2003) after macro-prudential measures were implemented over the years and bank buffers were built up following the global financial crisis.