Hong Kong banks' loan-to-deposit ratio stable at 67.3%

And funding costs eased slightly to 34bps.

According to Barclays, overall loan-to-deposit ratio was stable m/m at 67.3% (vs. 67.2% in October) due to steady loan growth (0.9% m/m) and deposit growth (0.8% m/m). Loan and deposit growth in HK$ was particularly strong, up 1.6% and 1.2% m/m, respectively. Net capital inflows into the HK$ will likely persist for some time.

Here's more from Barclays:

System loan growth of 0.8% m/m was largely driven by loans for use in Hong Kong. Trade finance loans declined by 3.5% m/m, which we believe reflects slowing cross-border trade activity.

Meanwhile, system deposits rose 0.8% m/m. Growth in RMB deposits (+2.9% m/m) and HK$ deposits (+1.2% m/m) was partly offset by contraction in US$ deposits (-0.3% m/m) and other FC deposits (-20% m/m).

Funding cost eased slightly: Funding cost decreased slightly by 2bps m/m in November to 34bps, as HK$ deposit competition eased while RMB deposit competition stabilised.

Offshore RMB (CNH) deposit growth and Qianhai cross-border lending developments: CNH deposits rose by 2.9% m/m to RMB571bn, accounting for 8.8% of total deposits (from 8.5% in Oct). We believe the increase in CNH deposits was driven by the mild CNY appreciation trend since Aug 2012 and higher CNH time deposit interest rates offered by banks to attract deposit inflows.

Moreover, there has been some regulatory progress on Qianhai cross-border lending. The People’s Bank of China (PBOC) recently approved the Interim Measures of Qianhai Cross-Border RMB Lending. Wenweipo reported on 1 Jan 2013 that the quota of the pilot scheme would be around RMB30-40bn and up to RMB50bn, less than 10% of CNH RMB balance of RMB550bn, citing people close to the regulator. All RMB cross-border loans and RMB bonds issued in the Qianhai area will be regarded as domestic investment, according to people close to the Qianhai Administration Bureau. The RMB cross-border loan pilot scheme will start with Hong Kong to mainland one-way lending. Companies registered and operated or invested in the Qianhai area can borrow RMB fund from Hong Kong banks and settle through Shenzhen banks. Interest rate is determined by the lending banks and company.

According to First Financial Daily, the first cross-border RMB loan in the Qianhai area will be arranged by Hang Seng Bank to Qianhai Development and Investment Holding Company (Qianhai Holding), a state-owned enterprise. Qianhai Holding is in charge of land primary development, infrastructure construction and large project investment.