London, Nov 28 (IANS): HSBC is facing a "hit" of more than £6.3 billion as a result of unsecured commercial property loans into China, a UK-based tax consultant has warned, a media report said.
Payments and banking consultant Bob Lyddon branded the situation as a ‘disaster’, and warned of a "financial contagion" risk which could have a knock-on effect on Britain’s economy, Express UK reported.
Earlier this month, HSBC had confirmed it was setting aside £910 million to cover expected loan losses, including £412 million related to the commercial real-estate sector in China - but Lyddon said the actual picture was much worse, Express UK reported.
The founder of Lyddon Consulting Services outlined his concerns in an analysis specifically written for Express UK, urging the bank not to underestimate the seriousness of the situation.
He said: "HSBC's stake in its Chinese bank - Hang Seng - looks overvalued by £3.3 billion given the benchmark set by Standard Chartered. Forty-two per cent of HSBC's commercial property loans into China are either sub-standard or credit-impaired: £4.6 billion out of £11 billion. That's a disaster.
"The equivalent figures just for Hong Kong are 63 per cent, and £3.8 billion out of £6 billion. That's a catastrophe," Express UK reported.
Even worse, £3 billion of this £3.8 billion was not backed by real-estate security, Lyddon stressed.