Hong Kong's loan-to-deposit ratio rises to 83.3% in March

A gradual rise in loan demand is being seen as the economy begins to recover, OCBC has said.

Hong Kong’s loan-to-deposit ratio increased to 83.3% at the end of March from 82.8% in February, which the Hong Kong Monetary Authority (HKMA) linked to the faster decrease of dollar deposits than dollar loans.

For the first quarter, loans for use in Hong Kong increased 3.6%, compared to a 5.4% decline recorded in the previous quarter. The increase was led by the trade finance, loans to stockbrokers and loans to building, construction, property development and investment.

“Going ahead, we expect loan demand to improve gradually should local economy recovery further on vaccine-supported border reopening,” OCBC Treasury Research said.

“This coupled with low base last year may warrant a low single digit growth in total loans and advances by end of this year,” the bank said.

In March, the total Hong Kong dollar deposits dropped by 1.8% month-on-month; whilst Hong Kong dollar loans fell 1.3%. The HKMA explained the monetary statistics in March may be distorted by the fund flows associated with large initial public offering (IPO) activities.

Renminbi deposits in Hong Kong increased by 1.5% to RMB772.5b in March; whereas the total remittance of renminbi for cross-border trade settlement amounted to RMB676.4b in March, higher than RMB441.1b in the previous month.

“On deposits front, as IPO pipeline remains busy while net inflows from Mainland China look likely under the upcoming southbound bond inflows, we expect total deposits to keep showing moderate growth this year,” it added.

“In conclusion, HKD loan-to-deposit ratio may rebound along with the loan demand and therefore help to cap the downside of HIBOR (Hong Kong Interbank Offered Rate).”