Bad loans ratio rises to nearly 2 percent in the first quarter: HKMA

The ratio of bad and doubtful loans in the Hong Kong banking system rose to nearly 2 percent in the first quarter, official data showed. 

The figure, also known as the classified loan ratio, inched up by 0.02 percentage points quarter-on-quarter to 1.98 percent, according to the latest quarterly bulletin published by the Hong Kong Monetary Authority.

The ratio for mainland-related lending decreased by 0.1 percentage point to 2.27 percent.

Special mention loans – money lent to borrowers facing financial difficulties – also increased, accounting for 2.25 percent of the total, up by 0.1 percentage point at the end of March. 

The aggregate pre-tax operating profit of retail banks increased by 15.8 percent year-on-year in the first quarter of 2025, mainly attributable to increases in income from foreign exchange and derivatives operations and income from fees and commissions, which were partly offset by a decrease in income from investments held for trading. 

Retail lenders’ net interest margin narrowed by 2 basis points to 1.51 percent in the quarter.