Date
17 December 2017
HKMA's Arthur Yuen says it is difficult to predict the loan growth trend for Hong Kong banks this year. Photo: EJ Insight
HKMA's Arthur Yuen says it is difficult to predict the loan growth trend for Hong Kong banks this year. Photo: EJ Insight

Hong Kong credit growth outlook hazy: HKMA

A slowdown in credit growth in Hong Kong last year is sparking concerns about the prospects for 2015, with authorities not too certain how things will turn out in the coming months. 

Hong Kong banks saw their total loans expand 12.7 percent last year, slowing from a 16 percent growth pace in 2013, figures from the Hong Kong Monetary Authority (HKMA) show.

In the second half of 2014, total loans were up only 5.7 percent from a year earlier, compared with a 19.1 percent growth rate in the first six months of the year.

Arthur Yuen, deputy chief executive of HKMA, said weaker demand was the main reason for the plunge in credit growth in the second half of 2014, and that it is difficult to tell whether the downward trend will continue into this year.

“Some economies may slow down, and some corporates may adjust their investment strategies based on changes in the foreign environment,” he said.

Yuen also cited supply-side factors, as banks have become more prudent in extending credit due to liquidity concerns.

The loan-to-deposit ratio of local banks stood at 72 percent for 2014, a level that Yuen described as “mid range but tending to be on the tight side”.

Among the different types of loans, trade finance dropped by 1.4 percent last year, compared with a surge of 43.8 percent in 2013.

Yuen believes it was largely because of a decline in trade activities between Hong Kong and the mainland.

Pre-tax operating profit of Hong Kong banks grew just 3.6 percent in 2014, compared with 21.7 percent in the previous year. Yuen attributed the decline to lackluster non-interest income.

Net interest margin remained at 1.4 percent, little changed from the 2013 level.

– Contact us at [email protected]

JH/JP/RC

EJ Insight reporter

EJI Weekly Newsletter

Please click here to unsubscribe