Total yuan deposits held by institutions in Hong Kong amounted to 6.3 billion at the end of May, but the benefit has been miniscule, according to Merrill Lynch.
The brokerage estimates the funds, which have accumulated in less than three months, had annualised net interest income at the end of May of less than HK$20 million, excluding bank operating costs.
The Bank of China (PBoC) is a prime beneficiary of the yuan clearing, controlling an estimated 80 per cent of the market. However, the combined contribution to earnings from net interest and clearing fees amounted to less than HK$22 million, according to Merrill Lynch estimates.
The brokerage believes most Hong Kong banks are losing money by accepting yuan deposits, but down the road the contribution to earnings should turn positive as liberalisation by the PBoC increases the type of yuan business permissible. The brokerage says the largest benefit to Hong Kong banks would come from new rules enabling the transfer of deposits to branches in the mainland, where the funds could then be lent out to borrowers.
