Hong Kong's family owned banks being snapped up
Like old Hong Kong, the city's traditional family owned banks may soon become a thing of the past. Under relentless market forces, they are under pressure to sell or merge with larger overseas or mainland financial giants. The small banks with fewer technology driven services but a nicer personal touch are becoming a rare breed. That will mark the end of an era which saw those banks prosper as Hong Kong's economy took off in the last half century.
Chong Hing Bank, the smallest of Hong Kong's family owned lenders, has accepted an offer of HK$11.6 billion from Yue Xiu, an investment arm of the Guangzhou city government. Subject to approval by the Hong Kong Monetary Authority, the takeover is likely to go ahead. Meanwhile, state-owned behemoth Agricultural Bank of China and Singapore's Oversea-Chinese Banking Corp have reportedly expressed interest in acquiring Wing Hang Bank. Smaller rival Dah Sing Bank has already said it is open to a sale or a merger.
The first of the local family controlled banks to go was Wing Lung Bank, which was sold to Shenzhen's China Merchants Bank in 2008. Ever since then, the writing on the wall has been clear.
In recent years, the smaller banks' net interest margins have been squeezed as interest rates practically hit zero. They are losing traditional business lines, such as lending to small and medium-sized companies, because large banks are muscling into the market, thanks partly to the government's business loan guarantee scheme. To maintain profits, small banks moved big time into mortgage lending as the property bubble heated up. Now that the property market has cooled and is expected to drop further, that line of business is not looking as rosy as it once was.
When the dust settles on all the sales and mergers, the Bank of East Asia may be the only independent, family controlled bank left. For better or worse, our banking sector no longer has room for small local banks that shared history with Hong Kong.