Hong Kong banks’ deposit growth lags at 1.6%

Loan demand pushes tighter liquidity.

According to Barclays, the HKMA’s February monetary statistics again showed tighter system liquidity, led by broad-based demand for loans (+3.2% m/m) while deposit growth lagged (+1.6% m/m).

The system loan-to-deposit ratio rose to 74% (from 72.9% in January), another record high since 2000.

Here’s more from Barclays:

Trade finance growth remains strong +2.6% m/m but a moderation from 10% m/m in January. We believe foreign banks have driven system loan growth higher while the domestic retail banks remain disciplined on keeping the loan-to-deposit ratio stable.

System loans rose by 3.2% m/m in February (vs. +3.7% m/m in January), driven by broad-based loan growth, in which loans used in HK increased 4.1% m/m (vs. +3.3% m/m in January).

System deposits in February rose by 1.6% m/m (vs. +0.1% m/m in January).

While RMB against the USD/HKD became weaker, RMB deposits still increased by 3% m/m, indicating RMB appreciation expectations in the long term remained strong.

However, growth of HKD and RMB deposits was partly offset by weakness of USD deposits, which dropped 1% m/m in February.