Hong Kong banks' loan growth is easing and will continue to slow, says Norman Chan Tak-lam, chief executive of the Hong Kong Monetary Authority.
Analysts share Chan's view because of slowing global trade volumes, further tightening of mortgage loans, and a decline in the number of mainland firms seeking funding in the city as Beijing's monetary policy is expected to ease in the coming months.
To be sure, slower loan growth would adversely affect bank revenues, analysts said. Raymond Yeung, a senior ANZ economist, said loan growth would weaken partly because Hong Kong's economy would likely decline in the fourth quarter.
The city's economy contracted 0.5 per cent in the second quarter, and ANZ forecast it declined by another 0.8 per cent in the third quarter.
That places Hong Kong's economy in a 'technical recession' - defined as two consecutive quarters of economic contraction, as opposed to consecutive year-on-year contractions which mark a full-fledged recession. Local banks have been lending more prudently towards the end of the year, given the current economic uncertainty and a jump in loan-deposit ratios, analysts say.
The Hong Kong dollar loan-deposit ratio jumped from 78.1 per cent from the end of last year, to 86.6 per cent by the end of September.