Mainland banks are scrambling for market share in Hong Kong, but accounting firm KPMG says it will continue to be dominated by the Big Three - HSBC, Bank of China (Hong Kong) and Hang Seng Bank.
Even though six of the top 10 subsidiaries of mainland banks in the city have seen double-digit growth rates, they are still losing market share in terms of deposits and assets to the larger players because of the rapid growth in those markets, the results of a KPMG survey published yesterday said.
That market dominance was unlikely to change even if Chong Hing and Wing Hang, which have been in talks about possible takeovers, were acquired by big mainland or regional banks, the firm said.
There are rumours that one of the mainland's Big Four banks, Agricultural Bank of China, could be a potential buyer as it looks to expand in the city, along with China Minsheng Banking Corp and Australia's ANZ.
"Chinese banks always have the ambition to go international. Hong Kong is always a great place for them," said Paul McSheaffrey, a partner at KPMG's China financial services, adding that regional banks were also keen to establish a footprint in the city. "Demand [for mergers and acquisitions] is always there."
KPMG China financial services partner, Rita Wong, said though mainland banks have been in the city for some time, the Big Three still dominate.
HSBC, BOCHK and Hang Seng combined had 63 per cent of total customer deposits in the city last year, up 1 per cent from 2011, according to KPMG, which analysed the financial figures of locally incorporated banks, mainland banks and international banks in Hong Kong.
Other licensed banks in the city, with mainland banks' subsidiaries as the majority, edged down a percentage point to 37 per cent despite asset growth, and improvements in net interest margins and cost-income ratios.
Meanwhile, many big international banks are more focused on cost savings, with Barclays and Credit Suisse withdrawing wealth management services in various countries.
"New regulations, many of which are globally driven, are a key issue for many banks, and go beyond the challenge of implementation," McSheaffrey said. "As a result, many banks are questioning whether they should remain in certain business lines or markets."
Banks in Hong Kong continue to look for opportunities to grow their income from sales of wealth management products. However, KPMG said, the current regulatory environment, especially for more complex structured products, increased the burdens for banks associated with these sales, resulting in limited growth.