Low rates, pandemic to hurt banks in 2021

Finance | Eurus Yiu 16 Jun 2021

Lower interest rates and the continuing Covid-19 pandemic will continue to impact the profitability of banks in 2021, says KPMG.

In its Banking Report, the accounting firm said that bank deposits grew as the total assets of all licensed banks expanded by 8.8 percent to HK$ 22.9 trillion last year.

However, the operating profit before impairment charges for all licensed banks decreased 19.3 percent to HK$232 billion in 2020.

Paul McSheaffrey, KPMG's China partner for financial services, believed that the prolonged low-interest-rate environment is putting pressure on net interest margins as a key source of revenue for banks, and many are seeking to generate income from other avenues such as fee-based wealth management activities.

He added that cost management remained an essential focus for banks in Hong Kong to monitor and improve profitability.

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