In this year’s annual Banking Report, we review the financial results of banks in Hong Kong in 2020 and provide our outlook for the industry.

It is hard to assess the performance of banks in Hong Kong in 2020 without talking about the impact of Covid-19. While the pandemic has undoubtedly had a negative impact on Hong Kong’s economy, it has not caused a significant financial crisis. The banking sector in particular has emerged from the worst of the pandemic reasonably well. Regulatory measures over the last few years to improve capital strength and liquidity, as well as the general strength of banks’ balance sheets, have shown that the banking sector in Hong Kong remains resilient. We did not see a significant increase in credit losses, and there have not been any challenges around falling asset prices giving rise to misconduct claims. However, the banking sector saw a drop in revenue in 2020, which is largely attributed to decreasing net interest margins. This has had a notable impact on overall profitability, and we expect this trend to continue throughout the rest of 2021 and probably into 2022. 

Notably, for the first time in 33 editions of our annual Hong Kong Banking Report we are delighted to feature a new category: virtual banks. This report analyses the results and key financial metrics of the eight virtual banks in Hong Kong and discusses their growth prospects. It is still too early to say who the market leaders might be, but the next 12 months will be critical for these new players to evolve and expand their offering to attract customers and start to show they have a sustainable future. 

Our report also explores four key themes that we believe are going to have a significant impact on Hong Kong’s banking sector in the year ahead.