Hong Kong banks' underlying earnings predicted to climb 6%

Thanks to these 2 growth drivers.

According to Barclays Research, the reporting season for Hong Kong banks is to begin on 1 August, starting with Bank of East Asia.

Barclays estimates underlying sector earnings will grow by 6% h/h and 2% y/y in 1H13, largely due to 1) mild margin improvement from lower funding costs and some upward loan repricing opportunities at the beginning of the year, e.g. loans to local small- and medium size enterprises (SMEs) and mortgages, offset by 2) lower property revaluation gains y/y.

Here's more:

Asset quality remains strong and credit costs low, in our view. Going forward, we expect margins to trend lower due to greater pricing competition, especially from larger foreign banking peers, which could lead to surplus liquidity and slower loan growth in 2H13E.