Not linked to property bubble fears: Analysts

Two treasury analysts China Daily spoke to Tuesday said that the decision by Standard Chartered Bank (Hong Kong) to raise its mortgage lending rate Monday was simply about increasing profits. They denied that there was a link between its decision and fears that risks to their mortgage lending business were rising.

Standard Chartered raised its mortgage lending rate from the current "HIBOR (Hong Kong interbank offer rate) plus 0.7 percent" to "HIBOR plus 0.8 percent to 1 percent" effective November 1 - the same day Hong Kong Monetary Authority Chief Executive Norman Chan warned that a bubble in the property and equity markets was forming.

Standard Chartered was the first local bank to raise its mortgage interest rate since Chief Executive Donald Tsang delivered the government's Policy Address on October 13.

Currently, the mortgage loan interest rates of major banks in the city such as HSBC, Bank of China (Hong Kong) and Bank of East Asia are set at a level of "HIBOR plus 0.7 percent".

A Standard Chartered spokeswoman said that the decision had noting to do with rising risk levels in the mortgage lending business.

"It is because the bank just ended its previous concessionary rates offered to clients, so the mortgage lending rate was pushed back to its normal level," she told China Daily.

Derek Chung, a senior vice president in the DBS deposits and secured loans department, said the decision was more than likely linked to the net interest margin (NIM).

"The decision is a reflection of the fact the NIM level is depressed and not that the banks perceive that the risk level for the mortgage lending business is increasing," Chung said. He added that DBS (Hong Kong) had already hiked the mortgage rate to the level of "HIBOR plus 0.75 percent" in July. Chung also expects other banks may follow suit if major banks take the lead.

Andrew Fung, general manager and head of treasury and investment at Hang Seng Bank, said that some banks raise the local lending rate as they are looking for business that brings better yields.

"As loan growth is exceeding deposit growth at local banks, it is important to find opportunities that can increase return yield," Fung said. "As the demand for the local mortgage lending business remains high, it may explain why local banks are increasing the mortgage lending rate."

Bank of China (Hong Kong), one of the city's major mortgage loan players, told China Daily that it does not intend to raise mortgage rates for the time being.

"BOCHK will not levy uniform mortgage rates, they will rather be determined by the relationship balance that clients have with the banks as well as the amount and tenor of the mortgage loans."

The other major mortgage loan lender in the city, HSBC, did not respond to China Daily's enquiry.

However, mid-sized banks such as Bank of East Asia and Wing Lung Bank said they would monitor the situation carefully.

China Daily

(HK Edition 11/03/2010 page2)