Lending growth to slow as liquidity returns to China, says HKMA
Fewer mainland firms to tap funds in Hong Kong as liquidity returns to normal across border
After meetings with 20 banks, the Hong Kong Monetary Authority, which was concerned about the rapid loan growth in the first half of this year, now expects credit expansion to slow as bankers say fewer mainland companies may need urgent loans from them.
In June, loans grew at the highest rate since January 2011.
They were mainly to big companies, and many involved revolving credit and syndication facilities, a spokesman for the monetary authority said yesterday.
The monetary authority did not elaborate on what kind of "big firms" borrowed most heavily, but some senior bankers said mainland companies accounted for most of the rapid loan growth, especially in June.
Many companies had difficulty securing loans from lenders on the mainland because of tightening liquidity there.
The findings came from on-site checks and meetings with 20 banks that the monetary authority, worried about asset quality, conducted to ensure sufficient risk management was in place.
These banks accounted for more than 90 per cent of the new loans in June.
Benjamin Hung Pi-cheng, Standard Chartered's Hong Kong chief executive, said on Thursday he expected fewer mainland firms to seek loans in the city compared with June.
As liquidity on the mainland returns to normal levels, the easing of demand for credit would help to mitigate banks' risks associated with mainland exposure amid weakening economic growth.
Loans grew 3.3 per cent in June from May, after climbing 1.7 per cent from April, mainly in US dollars.
The loan-deposit ratio, in US dollars, rose to 85 per cent from 80 per cent in May, the monetary authority spokesman said.
He said 40 to 50 financial firms had taken out loans amounting to HK$133 billion from the city's banks. They were mainly subsidiaries of big firms and provided no retail lending services.