The survey shows that last year was characterised by sustained loan growth, rising asset prices, low levels of bad debts and significant increases in the sale of investment products.

However, while the first half of this year saw a continuation of these favourable conditions, continuing low interest rates have placed further pressure on net interest margins, making it difficult for banks to grow revenue to offset rising wages and other costs. Banks will increasingly focus on operational efficiencies, off shoring and managing costs, the report says.

In addition, the report notes that Hong Kong dollar liquidity is increasingly becoming a more pressing concern for banks. The growth in local currency deposits has lagged behind Hong Kong dollar loans, as customers have favoured the appreciating yuan. In turn, the tightening of liquidity has helped to bring some pricing power back to the banks and added to the upward pressure on deposit rates as lenders compete for funds.

KPMG's report also shows that the total bank assets increased by HK$1.7 trillion, or 15 per cent, to HK$12.3 trillion during last year, with gross advances to customers growing by a strong 29 per cent. With total customer deposits growing by a more restrained 7.5 per cent the loan to deposit ratio increased from 52 per cent to 62 per cent.

The ranking of licensed banks by total assets remained unchanged from 2009 and there was only one new entrant to the top 10 rankings by net profit after tax, demonstrating that well-established banks continue to dominate.

The survey shows that licensed banks recorded better asset growth than during the 2009 recovery from the global financial crisis, with the Hong Kong operations of the large mainland banks generally growing their assets the fastest.

Martin Wardle, head of financial services at KPMG in Hong Kong, says banks face increasing regulations and compliance requirements. 'Basel III rules, for example, will require them to raise their capital and meet new liquidity requirements,' he says.