<div id="readability-page-1">Hong Kong’s retail banks posted 7.3 per cent pre-tax profit growth last year, as rising bad debts and a narrower net interest margin offset growing income from wealth-management services. The city’s 30 retail banks recorded lower growth in aggregated pre-tax profit than in 2024, when profits increased 8.4 per cent, according to data from the Hong Kong Monetary Authority (HKMA). The annual growth was much slower than the 62 per cent jump in 2023, when the city had just reopened the border with mainland China after the Covid-19 pandemic, and the 18.7 per cent increase in 2022, the data showed. “Overall, the banking sector in Hong Kong remains profitable, and the capital adequacy ratio and other key data remain well above international requirements,” said the HKMA’s deputy chief executive Arthur Yuen Kwok-hang, in a media briefing on Thursday. Local lenders have been hit by a higher proportion of bad or doubtful loans as the commercial real estate sectors in both Hong Kong and mainland China have been struggling. Hong Kong banks’ bad debt ratio stood at 2.01 per cent of total lending at the end of last year, slightly above the 2 per cent average over the past two decades. The ratio was 1.96 per cent at the end of 2024, 1.5 per cent at the end of 2023, 1.4 per cent in 2022 and 0.88 per cent in 2021. “Overall economic sentiment has improved recently,” Yuen said. “Still, there are certain industries, such as commercial real estate, that are still facing a lot of challenges. As such, HKMA will continue to work with the banks to manage their asset quality. Since the banks have made sufficient provisions against bad debts and local lenders are profitable, the risk management of the asset quality remains manageable.” The profitability of Hong Kong lenders was also hit by a slim net interest margin (NIM) – the gap between the rate charged on loans and the interest paid on deposits – which remained at 1.52 per cent at the end of last year, the same as the end of 2024. It was 1.67 per cent in 2023, 1.31 per cent in 2022, 0.98 per cent in 2021 and 1.18 per cent in 2020, the data showed.  The NIM fell amid dropping interest rates, as Hong Kong’s de facto central bank cut the city’s base interest rate by 75 basis points last year after a full percentage point reduction in 2024. Commercial banks in the city cut their prime lending rates by 25 basis points in 2025 after a decrease of 62.5 basis points in 2024. The current prime rate at HSBC, Hang Seng Bank and Bank of China (Hong Kong) matches the historical low of 5 per cent, while Standard Chartered and other major lenders have their rates set at 5.25 per cent. The 5 per cent level was seen from 2009 to 2018 and again from 2019 to November 2022. The one-month Hong Kong interbank offer rate, or Hibor, stood at 2.5 per cent on Thursday, compared with 3.75 per cent a year earlier. The banks’ capital adequacy ratio, a measure of financial stability, stood at 25.1 per cent at the end of last year, compared with 21.8 per cent at the end of 2024. Total deposits in the banking system rose 11.8 per cent last year, compared with increases of 7.1 per cent in 2024, 5.1 per cent in 2023 and 1.7 per cent in 2022. The amount loaned rose 2.3 per cent in 2025 after declining for three consecutive years, by 2.8 per cent in 2024, 3.6 per cent in 2023 and 3 per cent in 2022. Banks' fee income benefited from improved market sentiment, with fees from stock trades increasing as the Hang Seng Index jumped 28 per cent last year. In addition, many mainland residents continue to buy insurance and wealth-management products in the city.</div>

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<p>Hong Kong's retail banks experienced a 7.3% growth in pre-tax profits last year, down from 8.4% in 2024 and significantly lower than the 62% surge in 2023. Rising bad debts, particularly in commercial real estate, and a slim net interest margin of 1.52% impacted profitability. The bad debt ratio rose to 2.01%, slightly above the historical average. Despite challenges, the HKMA reported that banks remain profitable with a capital adequacy ratio of 25.1%. Total deposits increased by 11.8%, and fee income rose due to improved market sentiment and demand for wealth-management products.</p>

Hong Kong banks’ profit growth slows amid rising bad debt, slim margins