According to "The Big Bank" research, BOC HONG KONG's exposure to Vanke is estimated to be HKD 10 billion to HKD 14 billion, with the baseline scenario predicting a downgrade to a Level 3 loan next year

HSBC Research published a report indicating that BOC Hong Kong (02388.HK) may have a significant exposure to Vanke (02202.HK), thus facing higher credit costs. HSBC maintains a "Buy" rating for BOC Hong Kong, with the target price lowered from HKD 45.2 to HKD 43.2.

At the end of last month, Vanke proposed to postpone the repayment deadline for a domestic bond principal of RMB 2 billion, which was originally due on December 15. Following the announcement, the prices of Vanke's domestic and overseas bonds fell sharply. HSBC believes that the latest developments mean that the risk of BOC Hong Kong downgrading Vanke to Stage 3 loans has significantly increased, indicating that credit impairment has occurred.

The report states that as of the second quarter of 2025, BOC Hong Kong's commercial real estate loan balance in mainland China was HKD 77.6 billion, with state-owned enterprises and private enterprises accounting for 86% and 14%, respectively. Considering Vanke's large scale and BOC Hong Kong's consistent preference for lending to state-owned developers, it is estimated that BOC Hong Kong's exposure to Vanke may range between HKD 10 billion and HKD 14 billion, accounting for approximately 0.6% to 0.8% of its total loan balance.

HSBC believes that before the end of 2025, the likelihood of BOC Hong Kong downgrading Vanke's loan to Stage 3 is low, mainly because there is still a 30-day grace period for the domestic bond. The situation is still evolving rapidly, so multiple scenarios are outlined, with the base case being that Vanke's loan will officially be classified as Stage 3 in 2026, which will lead to a significant increase in BOC Hong Kong's corresponding credit cost provisions