Banks' loan growth eases to 2% in October

This represents the fourth straight month of decline.

The volume of loans and advances extended by Hong Kong banks extended its downward trend for the fourth consecutive month in October to book its slowest growth in two years at 2%, according to OCBC Treasury Research.

On a month-on-month basis, total loans and advances dipped 0.2%.

Loans for use in Hong Kong, which accounted for 65% of total loans and advances, inched up by a measly 0.3% YoY to $6.29t in October, reflecting a combination of downside factors including weaker housing loan demand, stock market rout and escalation of US-China trade war.

On the other hand, loans for use outside of Hong Kong picked up at a faster pace at 6.5% YoY to $2.9t in October but overall performance remained muted. “As Chinese authorities stepped up efforts to support the financing needs of the private sector, Mainland companies might have shown lower interests in overseas financing. The rising interest rates and exchange rates of HKD and USD might have also deterred Mainland companies from offshore funding,” OCBC Treasury Research said in a note.  

Also read: Bank loan growth may halve to measly 3% in December

The Hong Kong-dollar loan-to-deposit ratio edged up to 85.3% in October from 85.0% in September, as Hong Kong-dollar deposits decreased at a faster pace than Hong Kong-dollar loans.

On a seasonally-adjusted basis, Hong Kong-dollar M1 dropped by 4.7% YoY. Seasonally unadjusted Hong Kong-dollar M3 decreased by 0.4% MoM and down 2.1% YoY.

“All in all, we hold onto our view that the growth of total loans and advances will moderate from 3.9% YTD in October to 3% YTD in December due to a slew of unfavourable factors including the rising trend of local interest rates, US-China trade war, property market, and stock market correction, the PBOC’s easing bias and weaker RMB,” the firm added.