Hong Kong's retail banks recorded strong growth last year with aggregate pre-tax operating profits in respect of their Hong Kong offices up 31.1 percent, revealed the Monetary Authority Wednesday.

In its quarterly bulletin released Wednesday, the Monetary Authority, the city's de facto central bank, contributed the growth to the growth in net interest income and non-interest income.

Net interest income grew 17.4 percent last year, reflecting an expansion of assets and an improvement in the interest margin.

Meanwhile, non-interest income rose 48 percent mainly due to a robust increase in fees and commission income brought by a very active stock market. Non-interest income accounted for 44 percent of the banks' total last year, compared with 38.4 percent in 2006.

Retail banks' net charge for debt provisions more than tripled last year, according to the Monetary Authority's statistics.

The banks' net charge for other provisions also grew to HK$1.3 billion ($166.7 million) from a nearly zero- base in 2006, due to the deterioration in the quality of investment portfolios related to bank exposure to subprime-related products in the United States.

Helped by the rise in property value, banks' residential mortgage loans in negative equity fell to 1,900 cases at the end of 2007, with an estimated aggregate value of HK$3 billion ($384.6 million).

The delinquency ration of these loans rose to 1.75 percent from 1.57 percent at the end of September due to portfolio contraction.

The mortgage delinquency ratio fell to 0.11 percent last year, while the rescheduled loan ratio fell to 0.2 percent. The combined ratio fell to a new low of 0.31 percent from 0.35 percent at the end of September.

Banks' domestic lending fell 8.2 percent in the fourth quarter after rising 5.2 percent in the third, mainly due to a retraction in share financing.

Despite an increase of 7.7 percent in offshore loans, retail bank total loans fell 7.2 percent in the fourth quarter, according to the Monetary Authority.