Family-run banks "very likely" to be acquired

Hong Kong's publicly traded family-run banks are "very likely" to be bought by larger competitors as the cost of operating in the city rises, said a senior banker at the local unit of China's biggest lender.

The companies are attractive to cash-rich Chinese lenders who seek a platform for expansion in Asia, and to overseas banks aiming to push into China, said Stanley Wong, deputy general manager of Industrial & Commercial Bank of China Asia Ltd. He declined to say whether his bank's parent is in talks to buy a Hong Kong lender.

Family banks including Wing Hang Bank Ltd and Chong Hing Bank Ltd saw costs increase last year even as revenue dropped, squeezing profits. Wing Hang, run by the family of Chairman Patrick Fung, said last month it had received "informal and unsolicited" approaches, a year after China Merchants Bank Ltd beat ICBC to acquire Hong Kong's Wing Lung Bank Ltd.

HK extended loan scheme to help SMEs weather crisis

Hong Kong said yesterday it would extend a $12.8 billion loan- guarantee scheme for small and medium-sized companies to help them weather the global financial crisis given the economic outlook remains uncertain. The government said the scheme has been extended by six months until the end of June. Its loan guarantee commitment would remain at HK$100 billion ($12.8 billion). So far, 22,300 SMEs have applied to participate in the scheme, involving loans amounting to HK$53.5 billion, the government said.

Hong Kong pulled out of recession in the second quarter, but recovery is expected to be slow, as its trade sector is being held back by weak global demand. The government has spent HK$87.6 billion, equal to 5.2 percent of gross domestic product, on relief measures in the wake of the financial crisis.

They include help for lower-income families. The government says the loan guarantee scheme has stabilized over 10,000 companies and secured more than 240,000 jobs.

City to impose rules on bankers' pay in 2010

Hong Kong said yesterday it plans to introduce guidelines on remuneration for banking staff next year, in the wake of the financial crisis, but will not impose particular levels or limits on individual salaries. "Remuneration systems which create incentives for inappropriate or excessive risk-taking have the potential to threaten the safety and soundness of individual institutions and thereby ultimately the stability of the banking system as a whole," the Hong Kong Monetary Authority, the city's de facto central bank, said in a statement.

The guidelines would apply to Hong Kong incorporated banks and local branches of foreign banks, the HKMA said. The HKMA said it was consulting with the Hong Kong Association of Banks on the guidelines. They would cover governance and ensuring a proportionate balance of fixed and variable remuneration, as well as the use of instruments for variable remuneration; performance measurement; pre-defined performance conditions; and adequate disclosure. The consultation will finish at the end of November.

S&P lowers ING General HK rating to 'BBB+' from 'A-'

Standard & Poor's Ratings Services yesterday lowered its rating on ING General Insurance Co Ltd, the Hong Kong subsidiary of ING Groep NV, to 'BBB+' from 'A-'. The outlook on the rating is stable.

"The current ratings now reflect the company's stand-alone credit fundamentals, which are characterized by its strong capitalization, good operating performance, satisfactory business profile, and prudent investment profile," said Standard & Poor's credit analyst Paul Clarkson.

China Daily/Agencies

(HK Edition 10/30/2009 page3)