Hong Kong banks' cost to income ratios improve despite larger digital investments

The figure dipped from 47.9% in 2016 to 42.5% in 2017.

The average cost-to-income ratio of Hong Kong’s largest banks improved from 47.9% in 2016 to 42.5% as of end-2017 as new revenue streams offset higher operating expenses from digitalisation programmes, according to accounting firm KPMG.

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“Digitisation and automation continue to be a key focus for banks to manage costs and improve customer experience. A number of banks indicated that they increased their spending on innovation in 2017,” KPMG said in a report.

Total operating income of the top ten banks rose 10.4% which was offset by a 6.9% increase in opex, KPMG noted. CITIC registered the largest increase in operating costs due to steady investment in human resources and technology to match the growth of its new business.

HSBC also had higher operating costs due to steeper IT, professional and consultancy expenses as well as higher staff costs and investments in regulatory and compliance programmes.

On the other hand, The Bank of East Asia posted the largest decrease in opex and cost-to-income ratio of 8 percentage points last year as the bank enters its second year of a three-year cost saving plan.

Of the top locally incorporated banks, Standard Chartered opex rose 12.5% which was larger than its 4.8% increase in operating income. ICBC (Asia) continued to have the lowest cost-to-income ratio of 23.4% in 2017, although its cost-to-income ratio rose by 1.3 percentage points from 2016.