The Deloitte review was based on a survey of 25 licensed banks, whereas the KPMG survey covers all 31 licensed banks in Hong Kong, together with restricted-licence banks, deposit-taking companies and foreign bank branches.

Best performing banks in terms of returns on equity and assets for last year were Hang Seng (19.5 per cent) and Bank of America (2.4 per cent), with Union Bank (minus 22.5 per cent and minus 2.7 per cent, respectively) the worst performer in both categories, according to the Deloitte review.

By comparison, the KPMG survey published earlier this year ranked HSBC Investment Bank Asia (43.9 per cent) the top licensed bank in terms of return on equity last year, and Wayfoong Finance (3.18 per cent), the top-ranked licensed bank by return on assets.

The most expensive banking operation reviewed by Deloitte was Tai Sang Bank, which had a cost-income ratio of 72.8 per cent.

The lowest-cost bank among the 25 surveyed was Tai Yau Bank (19.5 per cent).

Leading banks by asset quality - measured by the ratio of non-performing loans to gross loans - were Jardine Fleming Bank, Tat Sang Bank and Tai Yau Bank, all of whom had no bad loans on their books.

The top listed bank was Chekiang First Bank, with a bad loan ratio of just 2.2 per cent.

Worst bad-loan bank was Union Bank (31.6 per cent).

On bank disclosure, Ms Xuereb said most Hong Kong banks were providing information of a generally high quality.

But there was room for improvement by promoting a better understanding of credit risk and in particular credit concentration.

'But they would score maybe eight or nine out of 10 on a disclosure report card,' she said.

'Advances represent about 50 per cent of total bank assets, so we looked at this carefully to determine how they are accounting for them.

'Generally, we can say that Hong Kong banks are complying with best-practice guidelines of the Hong Kong Monetary Authority [HKMA], but considering best practice recommended by the Basle Committee, there are some additional disclosures we would recommend.'

She said these included more detailed accounting policies and key assumptions for provisions, a geographical analysis of loans, concentrations of credit risk, interest-rate exposure from loans, fair value of loans, and better information on loan exposures and credit-risk management.

In disclosing investments, banks made little mention of certificates of deposit, and in most cases, no definition was provided of what 'fair value' meant, Ms Xuereb said.

Internationally, banks faced making greater levels of disclosure with respect to their hedging transactions next year.

'We have identified certain disclosures recommended internationally, which are not yet being required by the HKMA or by any other body in Hong Kong, and these include more detailed policies on hedging transactions, assumptions used for valuation purposes, determination of fair values and valuation adjustments, policies and procedures on netting, and more informative disclosures of derivative activities and risk management.'

These enhanced reporting requirements, which fell under International Accounting Standard 39, would have a 'great impact' on bank disclosures, Ms Xuereb said.

But a protracted study of their implications was likely to be conducted before they were considered for Hong Kong.

'Because of the requirement to fair value derivatives and other financial instruments, what the users are expecting is greater volatility in the income statements of banks, since they will be recording the movements of the marketplace in profit and loss accounts,' she said. This has led to criticism from banks and bank analysts.

'Given that scenario, I do not expect that this standard will be introduced very quickly in Hong Kong, and there will be a lot of studies which must first take place,' she said.