StanChart loans to China set to fall

Standard Chartered expects its loan growth to slow for the rest of the year as fewer mainland companies come to Hong Kong for funds, with the liquidity crunch easing there.

Benjamin Hung Pi-cheng, the Hong Kong chief executive of the bank, said the possible tapering of the US Federal Reserve's quantitative easing programme did not worry him as the lender now had an adequate deposit base.

Describing the bank's loan-deposit ratio as healthy, he said the net interest margin would stay at the same level of 1.7 per cent as in the first half.

A measure of profitability, net interest margin is the spread between the interest rate that a bank pays depositors and the one it charges borrowers.

Hung, who is also chairman of the Hong Kong Association of Banks, said his bank would consider "re-pricing" its loans in the second half in view of a potential tightening of liquidity in the city.

Concerns over the strength of the mainland's banking system have been growing amid a worsening economic slowdown. In late June, the interbank market was hit by a short liquidity crisis, in what was the worst cash crunch for decades. That forced many cash-strapped mainland enterprises, in particular small firms, to turn to Hong Kong for financing support.

Such loan demand is likely to fall, said Hung. Standard Chartered would take a conservative view in lending to these kinds of companies, added managing director Gloria Chow.

Standard Chartered's Hong Kong head of consumer banking, Mary Huen Wai-yi, said she expects mortgage lending to slow in the second half: "We may see some discount offers on mortgage, but there is unlikely to be a price war on lending rates."