Wing Hang Bank expects its asset quality to deteriorate this year in light of the economic environment. Chairman Patrick Fung Yuk-bun said yesterday the bank's ratio of non-performing loans to all loans - which stood at 0.6 per cent by the end of last year - would increase this year. He said it was uncertain how much the ratio would increase but he saw the macroeconomic environment deteriorating and unemployment rising. Head of product development Stephen Wong said Wing Hang would exercise extreme caution in extending credit to customers, especially those new to the bank. Wing Hang is also facing escalating pressure on its funding costs. Mr Fung said the bank was paying an interest rate of about 2 per cent over the interbank rate to attract deposits. He said banks' increasing hunger for the more expensive but stable retail deposits stemmed from the immense volatility in the money market last year, making them less dependent on interbank borrowing to finance their assets. They can also no longer rely on certificates of deposit (CD) to tap funds because of the lacklustre level of activity in the domestic CD market since the start of the year. Wing Hang has always been a net lender in the interbank market and occasional borrowing from the market comprised less than 1 per cent of its funding, according to Mr Fung. He made a conservative target of the bank's deposits growing by 10 to 12 per cent this year.