The banking industry was hard hit by the rapid rise of non-performing loans

Since May, Sun Hung Kai Properties' Sierra Sea project has significantly boosted the first-hand property market. Based on the ideal sales performance of the first three batches, the market deeply expected that its sales records would eventually stimulate a full recovery of the property market. As the market sentiment has been improving, a large local bank in Hong Kong was reported conducting large-scale layoff. This news was a wake-up call for Hong Kong's economy and real estate market.

Traditionally, banks in Hong Kong have been relying on residential mortgages and commercial property loans to maintain their core business development. Major banks have captured sixty percent of the residential mortgage market, leveraging their extensive networks and strong reputations. In opposition, small and mid-sized banks must redirect their strategies to compete effectively by focusing on property financing in mainland China and local commercial loans.

This business strategy has been developing smoothly. But until 2021, large China real estate companies encountered financial illiquidity one after another, and local banks which engaged in credit financing for related companies have resulted in a rapid rise in bad debts. Unfortunately, the market value of commercial properties in Hong Kong has also plummeted deeply at the same time, causing those banks to have been suffering from double whammy. Under this situation, large-scale layoff is the only way to reduce the amount of outflow funds, excepting larger provisions coverage.

In addition to the above-mentioned bank, another local bank is also facing the same difficulties. Therefore, it is expected that this bank will adopt the strategy to do a massive layoff in the near future. Thus, similar shocking news will happen consistently throughout this year.

In fact, the real estate industry in Hong Kong has a close relationship with the banking industry. If the real estate market faces a continuing downturn, the banking industry will not be immune to this impact. Today's layoff in the banking sector also reflects the poor operating conditions in the real estate market. As the banking sector continues to lay off staff, Hong Kong's unemployment rate will also be raised. Following the wave of retail industry closures, the service and banking industries are laying off employees, and this painful adjustment is still ongoing.