However when you are calculating LTVs and RWAs and PDs against bubble valuation levels, are they still appropriate? If you calculated it against replacement costs, the LTVs would go through the roof, and so would RWAs and the banks would be left with an CET tier 1 equity deficit to be covered by a rights issue. Any losses and higher RWAs on impaired loans would further cost equity.
So Hong Kong real estate which yields 1-3% rental yields in many cases, vs a Prime lending rate which is 5.15% is an enormous, negatively carrying bubble, propped up by speculation and Chinese capital flows.
HSBC is the 800lb gorilla in a banking system where M3 is >5x GDP.
M3 and Household debt to GDP:
Here are some excerpts from HSBC's financials and Pillar 3 statements for Dec 18.
HSBCs 2018 AFS. $300bn plus exposure to HK and China.
Downside risk scenario involves small house price drops and ongoing economic growth.
Trade exacerbated downside drives a greater slowdown in 2019 only with recovery in H2-20.
$55bn of Category 3 loans to wholesale borrowers. Category 3 typically has a 100% RWA under Basel III.
$58bn of CRE, $2bn impaired
About $15bn in higher LTV wholesale loans:
$108bn in personal loans, of which about $3bn are impaired
About $25bn in loans above 51% LTV
However most of their book has RWA charges determined by their Internal Ratings Based approach:
Using their IRB approach retail mortgages have only a 0.7% probability of default and a few percent of loss given default. They calculate a 20% RWA charge against this.
Wholesale loan PDs are also under 70bps and seem to be applying a 30% RWA charge.
Only by IRB derived models and applying low PDs and low LDG rates have they been able to book these loans at 20 or 30% RWA levels and as such 'Category 1 loans'. But Category 3, 4 or 5 loans carry 100% or 150% RWA charges. So any large falls in property prices and rise in PDs will absorb a lot of CET1.
As a reminder after the 1997 bubble imploded the Hong Kong residential index dropped from 172 to 59 between 1997 and June 03, a 66% drop in nominal terms and more in real.
And remember the prime lending rate is 5.15% and property yields 1-3%. Well they have 3 year interest deferred ARM mortgages to resolve for that.... I wonder if any of HSBC's wholesale loans book is against such loans?
I haven’t any word to appreciate this post.....Really i am impressed from this post....the person who create this post it was a great human..thanks for shared this with us. Horseshoe Bay Homes for SaleReplyDelete
The good news about investing in real estate. So helpful!ReplyDelete
If you don't know it, this is a pretty good deal, aurora condos for sale especially for a new real estate agent. The company also offers a 5 percent sponsorship fee to the agent who sponsors them on every deal they do.ReplyDelete
This is my first time visit to your blog and I am very interested in the articles that you serve. Provide enough knowledge for me. Thank you for sharing useful and don't forget, keep sharing useful info: Jawad AziziReplyDelete
Making it in real estate takes a person who has a strong desire to change their lives for the better and think big. Anyone can become a great real estate investor. It is going to take a lot of work and can be a struggle at times but in the end it will be the most amazing feeling ever. palm beach county property appraiserReplyDelete
In fact, real estate investments done with proper evaluation of the property (and its true value), can lead to good profits. real estateReplyDelete
The other method of buying land leads is by buying in to a land lead generator site that will send you a lot littler arrangements of leads all the time. The ClavonReplyDelete
This comment has been removed by the author.ReplyDelete
This comment has been removed by the author.ReplyDelete
Thanks for taking the time to discuss this, I feel strongly about it and love learning more on this topic. If possible, as you gain expertise, would you mind updating your blog with extra information? It is extremely helpful for me. Edward RenwickReplyDelete
I admire this article for the well-researched content and excellent wording. I got so involved in this material that I couldn’t stop reading. I am impressed with your work and skill. Thank you so much. ất nền quận 9ReplyDelete
This is the place where land barters come in picture, to educate likely customers about the property, and the venture prospects, giving them an away from of the land's worth.Ki residencesReplyDelete
They define your floor plan, divvying up the footprint of your space into multiple rooms. Walls support artwork, bookshelves Villa For Rent In Thao DienReplyDelete
You need to take part in a contest for one of the finest websites on the net. I will highly recommend this website!marble azReplyDelete
It’s hard to come by well-informed people for this topic, however, you seem like you know what you’re talking about! Thanks real estate SEO services
We Buy Houses Foreclosure Help Savannah, GA in Savannah on your terms. We offer an alternative solution to listing your home with a real estate agent. If you need to sell your house fast in the Stop foreclosure Savannah, GA Savannah area, we are serious about buying your house!ReplyDelete
Here at We Buy Homes Foreclosure Help Savannah, GA In Savannah, our goal is to educate homeowners about all of their selling options. If you need to sell Stop foreclosure Savannah, GA your house in Savannah or the surrounding areas, we will help you learn about your options.ReplyDelete
We Buy Houses in New Jersey on your terms. We offer an alternative solution to listing your home with a real estate agent. If you need to sell your house fast in the Foreclosure Help Savannah, GA New Jersey area, we are serious about buying your house.ReplyDelete
To help protect buyers from misrepresented square footage the Real Estate Council of Alberta recently announced new guidelines regarding home measurement in the province.Huntington Hills RealtorReplyDelete
Find property listed in Opasco.com, a property portal Marketplace for UAE property agencies, property developers and property broker’s to lineup their properties for sale and rent in Dubai. properties for sale and rent in DubaiReplyDelete
Iranian-Realtor.com is the Persian leading real estate and rental marketplace dedicated to empowering consumers with data, inspiration, and knowledge around the place they call home.Persian Real Estate AgentReplyDelete
Hi buddies, it is great written piece entirely defined, continue the good work constantly. immobilienmakler mülheim an der ruhrReplyDelete
Now I had never known either of those men and have no idea who they are but that experience lets me acknowledge that I must be doing my business at letting the world to recognize my business is buying real estate in that area. Cambodia real estateReplyDelete
Through this post, I know that your good knowledge in playing with all the pieces was very helpful. I notify that this is the first place where I find issues I've been searching for. You have a clever yet attractive way of writing. immobilienmakler mülheimReplyDelete
Property for Sale in Montenegro from CMM Group, the Award-Winning, Number One Real Estate Agent in Montenegro, which specializes in selling Apartments, Townhouses & Villas throughout this beautiful country, including Bar, Budva, Becici, Kotor, Tivat & Herceg Novi.ReplyDelete
Our office situated in the heart of Budva, is well placed to show you everything that Montenegro Real Estate in Montenegro has to offer, and our highly experienced International Property Consultants are ready to help you find your dream home here, whether you are after a holiday home, a permanent home or an Investment.
I learn some new stuff from it too, thanks for sharing your information. neak oknha chen zhiReplyDelete
Find out if the local movers charge by the hour, or if they charge a flat fee. Movers Near MeReplyDelete
This is aside from moving the furniture and equipment. Telephone lines, Internet connections, electrical work, and a slew of other things have to be completed prior to the furniture and equipment arriving to the new location. Movers Near MeReplyDelete
Jeder kann Wohnungen in Heidelberg verkaufen oder kaufen, wenn eine Person Kontakt mit dem Immobilienmakler Heidelberg des Vereins Heidelberger Wohnen aufnimmt. Es bietet die vorteilhaftesten Dienstleistungen für absolut jeden. Viel besser ist es, auf den Link https://www.orpiv.com/socialmedia/read-blog/1910_bedeutung-von-immobilienmakler-heidelberg.html zu klicken oder unsere professionelle Website zu besuchen, um mehr über den Immobilienmakler Heidelberg zu erfahren.ReplyDelete
This type of lead generation is great because rather than you doing the work to find people who want to buy or sell a property, the tables are turned and they come looking for you instead. vendere casa a torinoReplyDelete
Wonderful blog with many helpful pieces of information about Cornerstone . kindly visitReplyDelete
A Chinese speaking Realtor that can converse in Mandarin, Cantonese, and English. A Top 1% PREC Team Member for over 10 years in a row. A Team that knows how to get the best deal for you through negotiations and knowledge of Surrey Real Estate.Buy a luxury property and an elegant villa in Mykonos island GreeceReplyDelete
Real estate Mykonos villas for sale and for rent. Buy a luxury property and an elegant villa on Mykonos island Greece.ReplyDelete
mykonos villas for sale
Aside from the many real estate benefits of living in Naples Florida, there are Naples Florida many reasons to relocate to this beautiful city. Its shoreline is along the Gulf of Mexico.ReplyDelete
We buy houses in ANY CONDITION in Georgia. There are no commissions or fees and no obligation whatsoever.ReplyDelete
Sell my house fast in Atlanta
This type of lead generation is great because rather than you doing the work to find people who want to buy or sell a property, the tables are turned and they come looking for you instead.Listing agentReplyDelete
It seems you are getting quite a lof of unwanted comments. Maybe you should look into a solution for that. Hmm. dha islamabad house for saleReplyDelete