BANKS face another difficult year as the intensified credit squeeze in China, a possible increase in bad-debt level and rising interest rates in the United States continue to thwart profit growth, the Hong Kong banking regulator predicts.
Hong Kong Monetary Authority deputy chief executive David Carse said because the economic fundamentals in Hong Kong were strong and economies in Japan and the US were recovering, there was a silver lining.
The China factor was singled out as one that probably would create a negative impact on Hong Kong's exports and re-exports and on companies conducting mainland business.
'Some institutions are suffering from credit problems in China,' Mr Carse said referring to bad-debt provisioning as one of his main concerns.
At 0.05 per cent of total assets as at September last year, the bad-debt charge was much lower than the 0.14 per cent in 1993, when banks all reported remarkable profit growth.
'The provision can't go any lower. So the next change in direction will be upwards,' he said.
