This Aug 28, 2019 photo shows a view of Hong Kong. (PAUL YEUNG / BLOOMBERG)
Hong Kong banks saw year-on-year profits fall by nearly a third in 2020 and asset quality mildly deteriorated in the pandemic-wracked economy, the Hong Kong Monetary Authority said on Thursday.
Pretax operating profit plummeted 29.4 percent from 2019. The reduction was driven mainly by a drop in net interest income and a surge in loan impairment charges. The net interest margin fell to 1.18 percent from 1.63 percent in the same period last year.
Pretax operating profit plummeted 29.4 percent from 2019. The reduction was driven mainly by a drop in net interest income and a surge in loan impairment charges
Despite the gloomy numbers, the HKMA said the banking sector’s performance was “acceptable”.
“Hong Kong’s banking sector remains profitable and stable despite the pandemic-induced economy,” HKMA Deputy Chief Executive Arthur Yuen Kwok-hang said at a news conference.
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A slight deterioration in asset quality continued to weigh on banks’ profits amid the economic downturn. The classified loan ratio rose to 0.84 percent in September 2020 from 0.57 percent at the end of 2019. Yuen said the Hong Kong banking sector is well positioned compared with those of other major financial hubs facing the same problem — a deterioration in asset quality — citing Hong Kong’s strong capital and liquidity positions by international standards.
The HKMA also said that loans in the banking sector edged up 1.2 percent, a significant slowdown from that of 2019 at 6.7 percent. Contributing to the slowdown was weak demand amid the economic uncertainties, Yuen said. Leading the downturn was the growth in loans for use outside of Hong Kong, which rose 0.1 percent compared with a 5.8 percent increase in 2019.
Banks in Hong Kong also saw a stronger growth in deposits despite a low-interest environment. Total deposit rose by 5.4 percent in 2020 compared with that at 2.9 percent in the previous year, the HKMA said.
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Figures show that Hong Kong families were more reluctant to borrow loans from the banks in 2020. The growth in household debt dropped to 1.6 percent in the first half of 2020 from 5.7 percent in the second half of 2019, reflecting the decline in both personal loans and a slower growth in residential mortgage loans, according to the HKMA. Residential mortgage loans recorded narrower growth at 7.8 percent from nearly 10 percent during the same period last year, figures from the HKMA show.
Amid the uncertain prospects of the property market, the current financial measures in that category are unlikely to be changed, Yuen said.
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