Glonghui, December 13 | UBS published a report stating that Bank of China Hong Kong's rating was downgraded from “buy” to “neutral,” while Bank of East Asia upgraded from “neutral” to “buy,” and reiterated Hang Seng Bank's “neutral” rating. The bank believes that due to the low valuation of Hong Kong bank stocks and ideal dividend rates, the current downside risk seems limited. Despite this, the bank believes that the net interest spread brought about by the Fed's potential interest rate reduction cycle is not conducive to the prospects for net profit growth. The bank estimates that when the actual value of the project is significantly discounted by 25% or more from the book value, the Hong Kong commercial real estate bank loan of HK$279 billion may face the risk of default. Banks may incur impairment costs of HK$13.9 billion due to increased provision for commercial real estate risk exposure in Hong Kong. However, considering that the gap between the actual value of the project and the project support loan is only HK$1.7 billion, while the Bank of Hong Kong's profit before tax last year was about HK$183 billion, I believe the risk is basically manageable. As a result, the risk of non-performing loans varies from bank to bank, and it is expected that the risk is concentrated in small and medium-sized developers with high debt ratios. The bank mentioned that credit costs for local banks in Hong Kong may still be high next year.