Bank assets rise 7.1% to $26t in 2025

Loans returned to growth after three years of decline, whilst customer deposits increased 9.1%.

The banking sector regained growth momentum in 2025, with the total assets of licensed banks rising 7.1% to $26t, according to KPMG.

The increase was faster than the average annual asset growth of 3% recorded from 2022 to 2024, KPMG said in its Hong Kong Banking Report 2026.

Total loans and advances grew 3.3%, reversing three consecutive years of decline, whilst customer deposits rose 9.1%.

The sector benefited from Hong Kong’s resilient economic performance in 2025, when gross domestic product expanded 3.5%, up from 2.5% in 2024.

The Hang Seng Index gained 27.8% during the year, whilst residential property prices rose 3% following three years of decline.

Operating profit before impairment charges among surveyed banks increased 5.5% to $337b, supported by a 5.7% rise in non-interest income.

Net interest income also grew 4.5% to $308b as loan growth recovered. However, the average net interest margin of the top 10 locally incorporated licensed banks fell from 1.58% in 2024 to 1.52% in 2025 amid lower interest rates.

Banks maintained cost discipline, with the average cost-to-income ratio across surveyed institutions improving slightly from 42.1% to 41.9%. Operating income grew 5.1%, ahead of the 4.4% increase in operating expenses, although staff costs rose 6.7%.

Credit quality remained broadly manageable, with the impaired loan ratio across surveyed banks edging down from 2.15% to 2.14%.

However, KPMG said commercial real estate remained a key risk because of high vacancy rates and a modest retail-sector recovery.

The aggregate value of residential mortgages in negative equity declined to HK$105.4b at the end of 2025 from $195.1b a year earlier, as the residential market stabilised. The mortgage delinquency ratio remained low at 0.14%.

KPMG said the banking sector’s outlook for the rest of 2026 was broadly positive, supported by export momentum, stronger cross-boundary connectivity, recovering consumer and business confidence, and demand for AI-related products.

Growth opportunities are emerging in fixed income and currency markets, transition finance, private credit, family offices, digital payments, and Hong Kong’s planned development as an international gold trading hub.

However, banks will need to manage uncertainty over interest rates, mainland China’s property market, Hong Kong commercial real estate, global trade tensions, and geopolitical risks, KPMG said.