Hong Kong banks loan growth rebounds 5.2% in November

Business sentiment recovered mildly as corporates ramped up borrowing.

The volume of loans and advances extended by Hong Kong banks in November rallied after growing by 5.2% YoY to extend a 2% expansion in the previous month, according to OCBC Treasury Research.

Loans for use in Hong Kong, excluding trade finance, rose 6.9% YoY in November as business sentiment brightened on the back of the US-China trade truce and retracement of local borrowing costs (HIBOR) in November.

On the other hand, loans for use outside of Hong Kong continue to trend downwards from 6.5% in October to 3.8% in November as Mainland companies may have refrained from offshore financing. "[T]he rising USD and HKD rates as well as a weaker RMB made financing more expensive overseas than domestically. Lately, onshore financing became more attractive as the PBOC unleashed a raft of accommodative measures,” OCBC Treasury Research said in a note.

Also read: Do Hong Kong banks have reason to fear as Chinese lending accelerates?

Total deposits with authorised institutions rose 0.6% in November with Hong Kong-dollar deposits falling 0.5% and overall foreign-currency deposits inching up by 1.7%, data from the Hong Kong Monetary Authority (HKMA) show. Renminbi deposits stayed flat at $90.04b (RMB617.5b).

The Hong Kong-dollar loan-to-deposit ratio picked up to its highest since 2011 at 86.2% in November from 85.3% the previous month, as Hong Kong-dollar deposits declined whilst Hong Kong-dollar loans increased.

Moving forward, OCBC expects total loans and advances to settle at around 3% in 2018 and witness ‘mildly negative growth’ in 2019 owing to the high base effect.