Banks in Hong Kong are more likely to exercise prudence in granting credit to real estate companies as the city's property slump could be a "major risk" for lenders, the South China Morning Post reported Thursday, citing a report by Moody's.

Property development loans issued by banks comprised 16% of total borrowings as of June 2024, the report said, citing the debt watcher.

Banks in the city have "large exposures to commercial property," highlighting asset risks, the report said, citing Moody's.

Among those that have benefited from strong banking relationships is New World Development (HKG:0017). Loans to the developer have been usually unsecured, according to the SCMP.

The banking sector's exposure to NWD was 1% of gross loans and 8% of property development and investment loans, the report said.

NWD's debt-to-equity ratio surged to 89% in June from 55%, according to the report, citing data from HSBC (HKG:0005).

(Market Chatter news is derived from conversations with market professionals globally. This information is believed to be from reliable sources but may include rumor and speculation. Accuracy is not guaranteed.)