How Have Hong Kong Banks benefited Rate Hikes?

Hong Kong banks have benefited from rising interest rates and growing business opportunities after the border reopening this year, although uncertainties around the recovery in mainland China and in the city and the simmering property debt will provide a drag.


Lenders in the city remain cautious in lending to Chinese property developers, who have struggled in making debt repayments in the past few years while the importance of good lending practices are always highlighted.


Margins and operating income will go up, but credit costs will still continue to impact results. The growth of the sector is still economically connected, and GDP growth still has not come through as strong as people expected. However, new business opportunities in ESG, climate risk-management and wealth management are seen probably in the near future.


According to KPMG’s report released on Tuesday, Hong Kong banks are making the maximum possible gain from better margins and incomes although uncertain economic recovery and property sector crisis could be looming.

The report also stated that bad debts are expected to rise mainly on account of impairments related to the property sector. Hang Seng Bank, for example, recorded a 172 per cent surge in the expected credit losses last year from a year ago, primarily related to mainland China commercial real estate loans. Complex restructurings of Chinese developers are expected to continue inflicting losses on banks, as the pressures from bad debt ratios are seen to be sustained.