Hang Seng Bank

Small banks may gain from rate wait

PUBLISHED : Friday, 15 March, 2013, 12:00am
UPDATED : Friday, 15 March, 2013, 5:31am

The latest increase in mortgage rates in more than a year may offer some small banks a rare opportunity to grab a greater market share if they continue to hold their rates for some time.

Hang Seng Bank yesterday raised the rate for new applicants by 0.25 percentage point, taking the cue from HSBC and Standard Chartered Bank, which did the same the day before.

Hang Seng's best lending rate has been raised to between 2.4 and 3 per cent with immediate effect. It said the revision was a response to the changing conditions in the mortgage market.

The biggest mortgage player, Bank of China (Hong Kong), was also likely to increase the rate by next week, said a person familiar with the situation. He declined to be named as he is not authorised to speak to the media.

Smaller lenders, such as Wing Lung Bank, Chong Hing Bank and Dah Sing Bank, have so far not changed their rates.

Robbie Choi Yee-chuen, the head of mortgage and secured loans at Wing Lung, said funding costs had dipped this quarter from the previous one.

"Smaller banks can gain market share if they leave the mortgage rates unchanged," said Choi, adding the decision would depend on whether individual banks could sustain this strategy.

"This may be a good chance for us to increase our mortgage volumes as there were fewer property transactions last year and we could not grow our mortgage portfolio much," said an executive at a small bank.

Last month, the Hong Kong Monetary Authority told eight banks, including HSBC, BOCHK, Standard Chartered, Hang Seng, Bank of East Asia and DBS, to raise the risk weighting of their mortgage loans to 15 per cent from 10 per cent.

Banks are required to hold capital to cover for a certain proportion of their loans, weighted by the risk of their assets.

Dominic Chan, a banking analyst at BNP Paribas, said he expected one more mortgage rate rise of 0.25 percentage point in Hong Kong this year.

"We expect the rest of the sector to follow the latest move, which essentially brings newly offered mortgages into the 2.25 to 2.5 per cent band from the current 2 to 2.25 per cent band," Citi analyst Gary Lam said.

"Some banks expect the interest rate will rise in the coming two years. They have increased the lending rate on long-term loans," said Raymond Yeung Yue-ting, a senior economist at ANZ Banking in Hong Kong.