The prospect of Hongkong Bank and Hang Seng Bank going to war to attract new business in the territory has been raised.
Significant changes have been taking place at Hang Seng Bank in corporate strategy and business outlook in the past three years. A more aggressive bank has emerged from the old skin of what traditionally has been seen as a conservative, risk-averse Chinese bank. When a group the size of Hang Seng Bank, with total customer loans of $136 billion, decides to change course the face of banking in Hong Kong will change.
The 1995 financial figures issued on Monday showed strong loan-to-customers growth at 16.7 per cent and operating profit before provisions growth, up 25 per cent.
Hongkong Bank, with total customer loans between $380 billion and $410 billion, reported more modest 1995 numbers. Operating profit was up 23 per cent with loans-to-customers growth at 8 per cent.
In 1994, Hang Seng operating profit rose 9.5 per cent with loan growth up 23 per cent. Hongkong Bank operating profit fell 12 per cent while advances to customer grew 7 per cent.
Given the new situation, it looks like Hang Seng Bank is on a collision course with Hongkong Bank. Hang Seng Bank has a stated policy of increasing its advances to deposits ratio. In 1995 this rose from 44.8 per cent in 1994 to 47.1 per cent. For the record, analysts estimate the same ratio at Hongkong Bank is 61 per cent and at Bank of East Asia it is 71 per cent. This seems to indicate Hang Seng Bank has plenty of room to raise its loan deposit ratio. As long ago as October, 1994, bank chief executive Alexander Au Siu-kee said Hang Seng Bank planned to raise this ratio to between 50 and 55 per cent. This inevitably will mean market share will be taken in real terms from the parent, Hongkong Bank.