Big bank battle is on the cards

The city's five largest lenders are fighting to keep their customers as outsiders take them on in areas like credit cards and mortgages

PUBLISHED : Wednesday, 05 June, 2013, 12:00am
UPDATED : Tuesday, 11 June, 2013, 12:40pm

Hong Kong's retail banking market has become a ferocious battlefield between the local Big Five, who enjoy a long history and a strong customer base, and relative newcomers, including those from the mainland.

Credit card and mortgage services are already the two main areas these rival banks compete in, but industry watchers warn that profits will not come easily. Retail banking faces high costs for every effort from branch expansion to marketing and advertising in Hong Kong, one of the world's most expensive cities.

Hong Kong's Big Five are HSBC, Standard Chartered, Bank of China (Hong Kong), Hang Seng Bank and Bank of East Asia (BEA). Both HSBC and Standard Chartered have their headquarters in London, but each has a long history in Hong Kong, making some of their customers feel like they are more like local banks.

In comparison, relative newcomers have rapidly expanded in the city in recent years by promoting their banking business aggressively, such as credit card and mortgage promotion. They include Singapore's DBS, the American bank Citi and Australia's ANZ. Some mainland banks, including China Construction Bank, one of the Big Four state lenders, have also shown their ambitions in the credit card business in Hong Kong, targeting a fast-growing number of mainlanders working and studying in Hong Kong.

Miranda Kwok, the chief executive and president of China Construction Bank (Asia) in Hong Kong, said her bank aimed at a long-term improvement in market share, rather than short-term revenue growth. With China Construction Bank as the parent company, the Hong Kong subsidiary could offer more competitive rates on deposits and loans.

"We are keen to build our customer base and penetration," Kwok said, adding that the Chinese connection also made the bank more capable in yuan business.

Kenny Lam, a partner with McKinsey & Co, said credit cards and mortgages were useful tools for banks to gather customer information. The bank could get to know the spending pattern of its clients through the card, which made it easier to ascertain those affluent enough to be targets for wealth management cross-selling.

Lam said mainland banks were more capable of taking an aggressive approach in boosting scale with the support from parent companies on the mainland. Mainland banks had built their platforms in Hong Kong by setting up local subsidiaries in an effort to build up scale to capture potential big clients.

Ken Chew, a senior vice-president in consumer banking at DBS in Hong Kong, said: "When a bank is out of sight, it is out of mind." Chew said DBS was keen on promoting its card business because it was a visible product for the bank, and could help to build its brand.

People need to put money into banks when opening a account or paying interest on loans, but the challenge for the bank is to maintain that relationship.

The loyalty of credit card users could be relatively low, as each person in Hong Kong carries an average of 4.2 credit cards. More than 16 million credit cards have been issued in the city.

Lilian Chong, head of card business at Dah Sing Bank, one of the few local family-owned banks, said: "A credit card is not just a piece of plastic. It is the easiest tool to set up a relationship between the bank and a client."

At McKinsey, Lam said the vision for many mainland banks is to become the "primary bank" of customers in Hong Kong. A bank could get 30 per cent or more of the banking services of an individual once it becomes the most preferred bank of that person, he said.