Hong Kong banks vie for edge in yuan deposits with high rates

Hong Kong banks are stepping up efforts in the battle for yuan deposits with high interest rate promotions in the currency, which has fallen the most among Asian units this year.

The banks include HSBC, DBS, Wing Hang Bank and China Citic Bank International. HSBC is offering one-month deposits at 3.8 per cent per year, the highest among the lenders. It said the rate applied to those exchanging the Hong Kong dollar into yuan at the bank, but was limited to the daily conversion quota in Hong Kong of 20,000 yuan (HK$25,138) a day.

"More people in Hong Kong exchanged the yuan in recent weeks after seeing the currency had stabilised [from the first quarter]," said Yang Jiewen, head of the yuan business division at Bank of China (Hong Kong), the sole yuan clearing bank in the city.

Hong Kong's yuan deposits amounted to 920.3 billion yuan at the end of February, up 6.9 per cent from the end of last year, Hong Kong Monetary Authority data showed.

ICBC (Asia), the Hong Kong subsidiary of Industrial and Commercial Bank of China, said the bank would likely match any moves by its peers by raising interest rates on yuan deposits and that it planned to maintain the stability of its yuan deposit portfolio by offering attractive rates, deputy chief executive Peter Leung said.

Wing Hang Bank, the eighth-largest lender in Hong Kong, offers an annualised rate of 3.2 per cent for three-month yuan deposits for new funds to the bank ranging from 300,000 yuan to one million yuan.