HONG KONG's banking sector has been warned of rough seas ahead after Moody's Investors Services reported the sector's cycle has peaked and is on its way down.
'There are many challenges ahead, including tighter margins, more competition, slower loan growth and asset quality erosion,' said Moody's in a report by Hong Kong and New York analysts.
'However, the cycle . . . is not that different from what we have seen in other countries.
'Unique features are the 1997 issue, Hong Kong's more concentrated property-related lendings, the beginning of interest rate liberalisation, as well as a relatively young supervisory regime,' said the rating agency.
Its analysts expected smaller banks to form alliances to survive as the market became tougher, and warned that they should not assume the Government would bail them out.
Moody's Investors Service is a US-based rating agency which issues reports and credit ratings of companies, utilities, government agencies and banks.
The Bank of China was recently forced to cancel a record-breaking HK$5 billion issue of debt securities after Moody's downgraded its rating. Its Hong Kong report points out that the early 1990s had been lucrative ones for banks here.
