Hong Kong’s retail banks posted a 20.4 percent pre-tax operating profit in the first half of 2026, while the bad loan ratio dipped, data from the Hong Kong Monetary Authority showed on Tuesday.
This growth was primarily driven by increases in net interest income, fees and commission income, and income from investment held for trading, partially offset by a decrease in income from foreign exchange and derivatives operations, the banking watchdog said in the half-yearly monetary and financial stability report.
In the six months, the Hong Kong interbank offered rates rebounded while the funding costs remained stable, leading to a 6 basis points rise in net interest margin to 1.53 percent.
Total loans and advances of lenders grew by 6.4 percent in the period, reversing a 0.2 percent contraction in the second half of 2025, driven by increases in both domestic and non-Hong Kong-use loans.
The asset quality of the banking sector remained manageable, with signs of improvement observed in the first half of 2026.
The gross classified loan ratio, or the percentage of bad loans, declined to 1.82 percent in the second quarter from 2.01 percent in December.
The ratio of overdue and rescheduled loans also decreased mildly to 1.47 percent.
Still, as household debt expanded at a faster pace than Hong Kong’s nominal gross domestic product, the household debt-to-GDP ratio rose to 89.5 percent in the first half of 2026 from 87.6 percent in the second half of 2025.
