Bank loan growth may halve to measly 3% in December

The steep decline is partially due to higher interest rate environment.

Hong Kong’s bank loan growth extended its protracted decline for the third consecutive month after falling 0.1% MoM in September as increasingly dismal market conditions have severely impacted borrowing activity, according to OCBC Treasury Research.

“The continuous declines were mainly due to three factors including prospects of higher interest rates, trade war concerns as well as lower borrowing costs in Mainland China,” the frm said in a statement.

Also read: Hong Kong ends era of cheap money after hiking base lending rates to 2.5%

Loans for use in Hong Kong, which accounted for 65% of total lending, grew at the slowest pace since October 2016 at 7.7% YoY on the back of tepid housing and corporate lending. Similarly, loans for use outside of Hong Kong also grew at its weakest pace since December 2016 at 7.6% YoY.

“All in all, we expect the three factors will continue to tame loan demand. The growth of total loans and advances may slow down further from 7.2% yoy in September to around 3% yoy in December,” the firm said in a statement.

The Hong Kong-dollar loan-to-deposit ratio edged down to 85.0% at the end of September from 85.1% at the end of August, as Hong Kong-dollar loans increased at a slower pace than Hong Kong-dollar deposits.

On a seasonally-adjusted basis, Hong Kong-dollar M1 declined by 1.5% in September and decreased by 0.3% year-on-year. Seasonally unadjusted Hong Kong-dollar M3 edged up by 0.5% during the month and grew by 4.3% from a year earlier.