Hong Kong banks' bad loan ratio falls to 1.87pc, ending two-quarter rise

The banking sector's classified loan ratio fell to 1.87 percent at the end of March, down from 2.01 percent at the end of last December, after two consecutive quarters of increases, according to the Hong Kong Monetary Authority.

The HKMA published its Bulletin Issue 02/2026 on Monday and reported that the classified loan ratio for mainland-related lending also decreased to 1.79 percent from 1.94 percent a quarter earlier. The delinquency ratios of credit card lending and residential mortgage loans remained at low levels of 0.39 percent and 0.13 percent, respectively, at the end of March.

Retail bank's net interest margin widened to 1.53 percent in the first quarter, rising 0.02 percentage points year on year. The aggregate pre-tax operating profit of retail banks increased by 22.3 percent year on year in the first quarter, mainly due to increases in income from investments held for trading, dividends from subsidiaries and associated companies, and income from fees and commissions, which were partly offset by a decrease in income from foreign exchange and derivatives operations.

Contribution to the percentage change in pre-tax operating profit from income from investments held for trading and dividends from subsidiaries and associated companies rose 9.3 percentage points. But income from foreign exchange and derivatives operations fell by 9.3 percentage points.

Banking sectors' total loans increased by 3 percent in the first quarter, with loans for use in Hong Kong, loans for use outside Hong Kong, and trade finance rising 2.7 percent, 3.1 percent, and 7.9 percent, respectively. Mainland-related lending increased by 4.3 percent during the same period.

Within loans for use in Hong Kong, loans to professional and private individuals for other private purposes rose 6.1 percent quarter on quarter, financial concerns rose 4.7 percent, and manufacturing increased 7 percent.

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