Hong Kong banks hampered by tight controls
(04 March 2013 – Hong Kong) According to a new report, tight control at small Hong Kong banks has curbed the pace of their expansion and limited risks associated with new business outside the territory.
The majority of foreign lending is to China whose risks, according to the source, will continue to exceed those related to lending to the domestic property market.
Small domestic banks are keen on expanding abroad, due to competitive pressure they face in a mature low interest-rate Hong Kong market that is exacerbated by the banks' limited pricing power and regional connectivity.
Hong Kong banks’ loan growth remains below the sector's average, leading to a fall in their combined share of total loans to 7.2 percent in the first half of 2012, from 8.7 percent in 2009.
Pre-impairment profit is under pressure but, at an average of 1.1 percent of assets in H112, should provide an adequate buffer. Capitalisation is also sound with an average ratio of 13.7 percent at end-H112.
The small banks' average share of loans for use outside of Hong Kong increased to 38 percent of total loans at end-H112 from 31 percent at end-2009 (sector average: 35 percent at end-2012).
This compares with an average 35 percent of domestic property loans including residential mortgages at end-H112 (sector average: 33 percent at end-2012).
Gross mainland China exposures, which include claims on financial institutions, ranged from 55 percent of total assets at China CITIC Bank International Limited, to 17 percent at Dah Sing Bank at end-H112.
The banks covered by the source’s report are Chong Hing Bank Limited, CNCBI, DSB, Shanghai Commercial Bank Ltd and Wing Hang Bank Limited.
Small domestic banks are keen on expanding abroad, due to competitive pressure they face in a mature low interest-rate Hong Kong market that is exacerbated by the banks' limited pricing power and regional connectivity.
Hong Kong banks’ loan growth remains below the sector's average, leading to a fall in their combined share of total loans to 7.2 percent in the first half of 2012, from 8.7 percent in 2009.
Pre-impairment profit is under pressure but, at an average of 1.1 percent of assets in H112, should provide an adequate buffer. Capitalisation is also sound with an average ratio of 13.7 percent at end-H112.
The small banks' average share of loans for use outside of Hong Kong increased to 38 percent of total loans at end-H112 from 31 percent at end-2009 (sector average: 35 percent at end-2012).
This compares with an average 35 percent of domestic property loans including residential mortgages at end-H112 (sector average: 33 percent at end-2012).
Gross mainland China exposures, which include claims on financial institutions, ranged from 55 percent of total assets at China CITIC Bank International Limited, to 17 percent at Dah Sing Bank at end-H112.
The banks covered by the source’s report are Chong Hing Bank Limited, CNCBI, DSB, Shanghai Commercial Bank Ltd and Wing Hang Bank Limited.
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