HKMA reveals RMB deposit dipped by 2.2% in January

While trade finance rebounded 10%.

The HKMA’s January monetary statistics showed a rebound in trade finance +10% m/m while RMB deposit declined by 2.2% m/m.

According to a research note from Barclays, system loan-to-deposit ratio was largely stable at 72.3%.
The report noted that Hang Seng Bank remains Barclays' best idea among Hong Kong banks, given its strong capital base, deposit franchise, risk management track record and potential sale of the remaining 5.9% stake in Industrial Bank a positive catalyst.

Here's more from Barclays:

RMB deposits down m/m: System deposits in January increased 1.1% m/m, led by US$ and HK$ deposits (up 3.1% and 1.6% m/m, respectively) but was partially offset by a 2.2% m/m contraction in RMB deposits to RMB981bn, which we believe is due to RMB currency weakness where forward exchange rates currently imply a 2% depreciation of the RMB relative to the USD over the next 12 months.

System loan growth led by trade finance: System loans grew 1.2% m/m in January, driven by trade finance (+10.8% m/m), reversing part of the contraction in November and December 2014. Loans for use in Hong Kong and loans for use outside Hong Kong were up 0.5% and 0.3% m/m, respectively. The system loan to deposit ratio was largely stable at 72.3% while HK dollar LDR dropped to 82.5% from 83.3%.

Funding costs eased m/m: Composite interest rate, which is a measure of the system funding costs, dropped 3bp m/m to 36bp, after strong deposit competition for the December period end. The Hong Kong banks have been guiding for funding cost pressure to remain due to the implementation of liquidity rules.

Mortgage drawdown declined slightly: The January mortgage survey showed that Mortgage loans approved in January 2015 increased by 21.4% m/m to HK$30.3bn led by primary transactions. New mortgage loans drawn fell 2.7% m/m to HK$21.3bn. Outstanding mortgages increased 0.9% m/m as new mortgage loans booked offset principal repayments.

Hibor-based mortgage accounted for 84% of new mortgage approved. The average system mortgage rate was largely stable at 2.23 % based on our calculations. The HKMA today tightened mortgage lending rules further by lowering LTV and DSR and mortgage growth could potentially slow going forward.