Deposits and loans increase amid fifth wave of pandemic

Banks take in HK$7.58 trillion by the end of the first quarter while lending grows 1.9 per cent

Hong Kong’s banking system held up well amid the fifth wave of the Covid-19 outbreak, as deposits and loans increased during the first quarter, according to data from the Hong Kong Monetary Authority (HKMA).

The amount of Hong Kong dollars deposited into the city’s banks grew to HK$7.58 trillion by March 31, up by 2.2 per cent from the beginning of the year and 1 per cent from a year earlier.

Total deposits, which include Hong Kong dollars, US dollars and other currencies, stood at HK$15.35 trillion, rising by 1.1 per cent in the quarter and 4.5 per cent from a year earlier.

Total loans in Hong Kong reached HK$7.87 trillion, up by 1.9 per cent from January and 3.3 per cent year on year.

Mortgages approved in March increased by 31.6 per cent from February to HK$34.7 billion, while drawdowns rose by 7.1 per cent to HK$25.7 billion.

“The pandemic peaked in early March, and business activities and property transactions gradually returned to normal in the second half of March. This has supported the mortgage market,” said Eric Tso Tak-ming, chief vice-president of mReferral Corporation.

“The mortgage market is likely to continue to be stable in April after the relaxation of socialdistancing rules. Other sectors should see an improvement in April as a result of the consumption vouchers and other relief measures from the government.”

Bank lending to stockbrokers and their clients dropped by 54 per cent year on year to HK$52.39 billion in the first quarter, as loan activities fell victim to the slump of initial public offerings during the period.

“It is not a surprise as the few new listings mean investors had no need to borrow money for the share sales, while the market sentiment discouraged margin financing,” said Tom Chan Paklam, chairman of the Hong Kong Institute of Securities Dealers.

Eleven firms raised US$1.72 billion in the first quarter, down by 90 per cent from a year earlier, according to data from Refinitiv.

The mega offering of mainland video-sharing platform Kuaishou Technology raised US$6.2 billion in January last year, the world’s third-biggest listing in 2021.

There had been no new listings on a comparable scale last quarter. JL Mag Rare-Earth, a manufacturer of rare earth materials, raised US$544.6 million in January. It was the city’s largest offering this year so far, but only ranked 11th worldwide at the time, Refinitiv data showed.

“Looking ahead, we should be more optimistic about the listing market as sentiment has improved recently,” Chan said.

The increase in deposits and loans showed the city’s financial activities had not been affected by the widespread closure of bank branches during the first quarter.

Hong Kong’s 20 major lenders temporarily shut about 200 branches from February 7, with more than 600 closed by early March, owing to public health concerns. Most reopened on April 19 when the outbreak subsided.