Hong Kong bank loans up 3.6% in July

The subuded pace of growth is expected to be maintained for the rest of the year.

Hong Kong banks' total loans advances continued to grow at a moderate pace by 3.6% YoY in July, according to OCBC Research. 

Loans for use in Hong Kong (excluding trade finance) grew by 4.7% during the month as the combination of elevated local borrowing costs, sour business sentiments and housing market correction might have partially offset the support from trade war de-escalation and Fed’s rate cut expectations in July, according to Tommy Xie, Vice President, Head of Greater China Research.

Similarly, loans for use outside of HK held static at 3.5% yoy, suggesting benign loan demand from Mainland China.

Also read: Banks in Hong Kong make do with falling loan growth as earnings lifeline

"Loans for use outside of HK may stay sluggish as well amid China’s economic slowdown, the PBOC’s efforts to support the funding needs of SMEs, the light pipeline of overseas business expansion of Mainland companies and the curb on offshore finance of Mainland property developers," Xie added. 

HKD loan-to-deposit ratio (LDR) retreated slightly from the highest since January 2003 of 89.3% in June to 88.9% in July as HKD loans decreased by 0.4% mom and HKD deposits were unchanged.

In terms of HKD deposits, due to the trade war de-escalation and increased speculation on Fed’s aggressive rate cut in July, the slightly improved investment sentiments supported HKD CASA deposits to rebound by 1.2% mom, data from OCBC show.

With the eased HKD liquidity prompting commercial banks to reduce HKD fixed deposit rates, HKD fixed deposits retreated by 1.5% mom. As such, the percentage share of HKD CASA deposits in total HKD deposits rallied slightly to 56.5% in July but remaining much lower than the monthly average of 62.8% in 2018. 

Year-end loan growth is expected to hit 2% in 2019 from 5% in 2018 as trade and mortgage loans take a heavy beating, according to an earlier report from Fitch Solutions.