HSBC moved HK$11bn of loans off Hang Seng’s balance sheet in the first half of the year in the clearest sign yet that Europe’s largest lender is moving to clean up the Hong Kong bank it now fully controls. Hang Seng sold a loan portfolio for HK$11bn ($1.4bn) to HSBC’s Asia-Pacific subsidiary on “arm’s-length terms”, according to a related-party transaction disclosure it made in August.

The disclosures did not specify whether the loans were “non-performing” or distressed, but in the first six months of the year Hang Seng’s “stage 3” impaired loans fell by HK$20bn ($2.6bn) to HK$37bn. A significant proportion of HSBC’s bad loans in Hong Kong are concentrated in Hang Seng, making the lender appear weaker and less profitable.

Hang Seng’s non-performing loan ratio stood at a record 7 per cent in December 2025, above the heights of the Asian financial crisis. By the end of June this year the ratio had fallen to 4.6 per cent, indicating a rapid turnaround. Its allowances for expected credit losses decreased by HK$1.6bn to HK$17.5bn even as the bank took an expected credit loss charge of HK$2.4bn for the first half of 2026.

Outgoing chief financial officer Pam Kaur said the bank is focusing on driving capital efficiency through balance sheet velocity, including adjusting the mix of portfolios between Hang Seng and HSBC in Hong Kong. HSBC first bought a controlling stake in Hang Seng during a financial crisis in 1965 and last year took the bank private for $13.6bn.