Hong Kong banks' loan growth may slow to 5% in H2

Trade tensions and higher interest rates are to blame.

Hong Kong banks are expected to lend less in the second half of the year with total loan growth poised to slow to around 5% by end-2018, according to OCBC Treasury Research.

Total loans and advances grew at the slowest pace in over a year after hitting $9.8t in June.

“The slowdown could be attributed to three major factors including US-China trade tensions, higher interest rates as well as the reduced funding demand of Mainland companies in the offshore market,” OCBC said in its report.

Also read: Hong Kong banks wage war over fixed deposits as interbank lending rates surge

Loans for use in Hong Kong, which account for 64.4% of total loan portfolio, registered the softest growth since January 2017 after rising 11.2% YoY in June as trade tensions may have hit corporate sentiment.

Loans for use outside of Hong Kong also moderated to its weakest point in over a year at 10% YoY.

However, a steady stream of lending for blockbuster share sales including Xiaomi and China Tower boosted the banking sector’s loan growth with IPOs loans estimated at $15.3b as of end-June, according to data from the Hong Kong Monetary Authority.