By South China Morning Post | Created at 2025-01-22 08:26:27 | Updated at 2025-01-22 10:47:01
2 hours ago
Hong Kong’s banks posted the slowest profit growth in three years, as three rate cuts since September 2024 eroded profit margins and fee income earned from stock trading and wealth management.
The aggregated pre-tax profit among the city’s 30 retail banks increased by 8.4 per cent in the first nine months of 2024, slower than the 62 per cent jump in 2023 and 18.7 per cent in 2022, according to data from the Hong Kong Monetary Authority (HKMA).
The banks’ net interest margin (NIM) – the gap between the rate charged on loans and the interest paid for deposits – narrowed to 1.5 per cent in the first nine months last year, compared with 1.67 per cent in 2023, the data showed. The NIM was 1.31 per cent in 2022, 0.98 per cent in 2021 and 1.18 per cent in 2020.
“Profitability remained good among the banks, but we will have to focus more on bad debt issues and the increasing trend of financial scams this year,” the HKMA’s deputy CEO Arthur Yuen Kwok-hang said in a media briefing on Wednesday.
The industry’s NIM was compressed when Hong Kong’s de facto central bank slashed the city’s base interest rate by a full percentage point in three cuts starting in September, in lockstep with cuts by the US Federal Reserve. Commercial banks in the city have followed the moves by cutting the borrowing cost for their best customers by 62.5 basis points since.
Adding pressure to banks’ balance sheets, the proportion of bad or doubtful loans has risen, as more businesses grappled with higher funding costs amid a shaky economy. The ratio widened to 1.99 per cent of total lending as of September, compared with 1.89 per cent in June, 1.5 per cent at the end of 2023, 1.4 per cent in 2022 and 0.88 per cent in 2021.
