Hong Kong banks to benefit from better margins and incomes although uncertain economic recovery, property sector crisis could drag, says KPMG
- The impact of interest-rate hikes will continue to filter through this year, as China’s reopening benefits lenders in the city, says KPMG’s latest report
- Banks in the city remain sensitive to China’s property crisis, while new business opportunities in ESG, climate risk-management and wealth management seen ahead
Hong Kong banks are expected to benefit 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, consultancy firm KPMG said in a report released on Tuesday.
Lenders in the city remain cautious in lending to Chinese property developers, who have struggled in making debt repayments in the past few years, said Paul McSheaffrey, partner, financial services of KPMG China in an interview, while highlighting “the importance of good lending practices.”
“Margins and operating income will go up, but credit costs will still continue to impact results,” said McSheaffrey. “The growth of the sector is still economically [connected], and GDP growth still has not come through as strong as people expected. But I remain optimistic about the second half being quite good.”
He said this outlook follows the decent financial performance by the city’s banks in 2022 despite Hong Kong’s economic contraction of 3.5 per cent. This was largely on account of the interest-rate increases made by the banks.
“Looking ahead, the performance of the Hong Kong banking sector in 2023 is likely to be linked closely to the speed and extent of the economic recovery in Hong Kong and also the growth of the Chinese mainland economy, and in particular the health of its real estate, technology, media and telecoms sectors,” said the report released on Tuesday.
