Bangkok--15 Mar--Moody's Investors
Moody's Investors Service says in a new report that the outlook for the Hong Kong banking system is stable, based on the increasing number of encouraging signs for the operating environment over the next 12 to 18 months.
"Specifically, the global economy is continuing to gradually recover, while the Chinese government tightening of monetary policy improves the chances that bank credits will grow at a more sustainable and healthier rate," says Leo Wah, a Moody's VP/Senior Analyst and author of the report.
"A solid Chinese economy is also important to the banks in Hong Kong given the growing integration between the economic systems in mainland China and Hong Kong," says Wah.
The report also notes that banks are enjoying better access to international debt and money markets, as indicated by recent successful issuances of rated debt amounting to about USD 2 billion so far this year.
"In addition, recent conversations with Hong Kong banks have alleviated most of Moody's worries," says Wah, adding, "In particular their growing confidence in the operating environment is leading to banks carefully increasing their risk appetite for lending and treasury operations."
This development will enable the banks to enjoy better profitability without taking on too much additional risk, thereby optimizing their risk and return profiles, according to the report.
In addition, banks are planning to increase staff training, enhance due diligence on investment products, and ensure a good match between customer needs and investment product features. This should help Hong Kong's banks avoid the reputation and financial damage of another episode like the Lehman minibond fiasco, and facilitate a recovery of wealth management income over the medium to long term, says the report.
The report also cautions that downside risks remain as Hong Kong's open economy consists of some highly cyclical industries and remains exposed to global economic shocks, which could under certain conditions adversely affect the banks. However, due to strong financial profiles, crisis-test management teams, and a stringent regulatory regime, these risks should not pose serious damage to the banks.
The report, entitled, 'Hong Kong -- Banking System Outlook', can be found at www.moodys.com .
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Hong Kong
Leo Wah, CFA
Vice President - Senior Analyst
Financial Institutions Group
Moody's Asia Pacific Ltd.
JOURNALISTS: (852) 2916-1150
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Hong Kong
YoungIl Choi
Vice President - Senior Analyst
Financial Institutions Group
Moody's Asia Pacific Ltd.
JOURNALISTS: (852) 2916-1150
SUBSCRIBERS: (852) 3551-3077