Hong Kong banks to focus on resilience, costs in 2025: KPMG

Interest rate reductions are likely to be slower.

Resilience, costs, and digital transformation are the top priorities of Hong Kong’s banking sector in 2025, as losses by banks and customers continue to make headlines, reports KPMG.

Retail and commercial banks will be able to preserve their margins as the pace of interest rate reductions are likely to be slower than forecasted, the accounting giant said in its latest outlook report on Hong Kong’s banking industry.

For investment banks, the positive policy measures in China are expected to enhance consumer sentiment. It will foster capital raising and mergers & acquisitions (M&A) activity in China and ultimately benefit Hong Kong.

Implementing existing regulations and new resilient requirements are expected to be a “strong focus” of the sector over the next 12 months.

AI adoption is also expected to become a sector-wide topic in financial crime over the two years, whilst regulators are expected to launch initiatives for adoption of distributed ledge technology (DLT).

Meanwhile, banks are expected to adopt strategies for cost optimisation, including targeted corrective interventions for inefficiency.

“Automation can be an effective tool in this process, addressing latent inefficiency in core processes across front, middle, and back office,” KPMG said.

This can lead to increased productivity, reduced cost to serve, an enhanced customer experience and ultimately, a stronger top line, it added.

The pace of digital transformation in the sector is expected to accelerate in 2025. Over a third of the finnacial institutions in the city already integrated generative AI in their operations. Virtual assets have also ranked high in the digital transformation agency of banks and regulators.

Tokenization market development is also supported by authorities, with the Hong Kong Monetary Authority (HKMA)’s Project Ensemble Sandbox and the HKEX’s Virtual Asset Index Series.