Overview of financial results

All surveyed licensed banks saw their average NIM⁸ decline by 7 basis points from 2024, reflecting the movement in interest rates over the year. Interest rates remained stable until September 2025, when the U.S. Federal Reserve cut rates.  

Despite the minor NIM contraction, total net interest income for all surveyed banks increased by 4.5%, from HK$295 billion in 2024 to HK$308 billion in 2025, in line with the recovery in loan growth. The average NIM for the top ten banks decreased from 1.58% in 2024 to 1.52% in 2025, with six of the top ten recording decreases. 

Among these, certain banks were able to record positive performances, notably The Hongkong and Shanghai Banking Corporation Limited (HSBC), Standard Chartered Bank (Hong Kong) Limited (SCB), Nanyang Commercial Bank, Limited (Nanyang) and China Construction Bank (Asia) Corporation Limited (CCB (Asia)), all of which recorded year-on-year NIM improvements, helping to cushion the overall slight decline. Consistent with 2024, DBS Bank (Hong Kong) Limited (DBS), Hang Seng Bank, Limited (Hang Seng) and The Bank of East Asia, Limited (BEA) recorded the three largest NIMs in 2025. 

Notably, CCB (Asia) recorded the largest increase of 13 basis points, from 1.59% in 2024 to 1.72%. This growth was driven by a 14.8% increase in net interest income, as the bank continued to capitalise on its cross-boundary banking strengths⁹. Similarly, HSBC’s NIM rose modestly from 1.63% in 2024 to 1.68% in 2025, mainly due to lower funding costs¹⁰.

DBS’s NIM fell from 2.27% in 2024 to 2.06% in 2025, driven by a decrease in net interest income of HK$144 million, or 1.3%, in combination with an 8.5% increase in average total assets. The asset growth stemmed from the redeployment of increased customer deposits into treasury investments and placements with banks.

Hang Seng’s NIM fell by 21 basis points, from 2.20% in 2024 to 1.99% in 2025, mainly due to a decline in the contribution from net-free funds, a subdued loan demand and a redeployment of funds to financial investments with lower yields¹¹.

BEA’s NIM decreased by 19 basis points, from 2.09% in 2024 to 1.90% in 2025. Net interest income declined by HK$1,207 million, or 7.3%, to HK$15,322 million, mainly due to de-risking of volatile commercial real estate exposures as the bank diversified into other sectors¹².

Excluding Hang Seng, which ceased to report the split of its customer deposits by types in its 2025 annual report, current and savings account (CASA) balances made up 44% of total deposits at surveyed banks by the end of 2025, slightly up from 41% by the end of 2024. Considering the existing interest rate environment and headwinds to interest rate cuts, we do not expect any drastic change in deposit composition.

Looking ahead, with the sector facing structural pressures from a lower-rate environment, we believe Hong Kong banks’ profitability in 2026 will depend on their proactive asset-liability management strategies to safeguard their net interest margins.

Banks in Hong Kong continued to maintain strong cost discipline in 2025, while investing in digital transformation of their banking operations, with AI as a key enabler¹³. At the same time, we observed a strategic pivot toward fee-based income, which, combined with efforts to boost operational efficiencies, helped to reduce the average cost-to-income ratio by 25 basis points from 42.1% in 2024 to 41.9% in 2025. 

The improvement came as operating income grew 5.1%, outpacing the 4.4% increase in operating expenses across all surveyed banks. Reflecting ongoing challenges in acquiring and retaining talent across the banking sector, total staff costs increased noticeably by 6.7% in 2025. 

Among the top ten surveyed banks, total operating income grew 4.9%, ahead of the 3.6% increase in total operating expenses. Nonetheless, their weighted average cost-to-income ratio rose marginally from 40.9% in 2024 to 41.1% in 2025, mainly due to the jump in cost-to-income ratio of China CITIC Bank International Limited (CNCBI) from 38.4% in 2024 to 44.6% in 2025. We noted that six banks lowered their ratios year-on-year. 

Among these, Bank of China (Hong Kong) Limited (BoC (HK)) and SCB continued to record the lowest and highest cost-to-income ratios at 23.8% and 57.5%, respectively. BoC (HK), CCB (Asia) and Industrial and Commercial Bank of China (Asia) Limited (ICBC (Asia)) stood out as the only institutions to achieve cost-to-income ratios below 30%. In contrast, SCB remained alone in having a cost-to-income ratio above 50%.

CCB (Asia) recorded the largest reduction among the top ten, with its cost-to-income ratio dropping from 30.4% in 2024 to 26.8% in 2025. Although operating expenses rose by 6.1%, they were outpaced by a jump of 20.3% in operating income, which in turn was primarily driven by large increases in net trading income of 30.7% and net fee and commission income of 17.2%^9.

CNCBI recorded the largest increase in cost-to-income ratio, rising from 38.4% in 2024 to 44.6% in 2025. This was primarily due to a 19.9% increase in operating expenses, mainly driven by a 34.6% rise in staff costs¹⁴, largely outpacing the 3.1% growth in operating income.

Total gross loans and advances of all surveyed banks rose by 3.3% to HK$9,820 billion by the end of 2025, following a 2.3% decline in 2024. Early monetary easing stimulated lending in the first half of 2025, before momentum waned as domestic corporate borrowing grew more cautious in the second half of 2025, particularly in the electricity and gas, manufacturing, and wholesale and retail trade sectors³. Nonetheless, steady household demand for mortgages and personal credit compensated, reversing the contraction seen in the previous year.

Commercial loans, mortgage lending and loans for use outside Hong Kong continued to dominate loan portfolios, representing 89.0% of total loans in 2025 compared with 89.2% in 2024. Loans for use outside Hong Kong and commercial loans remained the two largest segments, with the former increasing by 99 basis points to 39.8% while the latter decreased 106 basis points to 28.1%.

Among the top ten surveyed banks, gross loans and advances rose by 3.2% to HK$8,469 billion, following a decrease of 2.1% in 2024. This recovery in portfolio growth was seen in eight of the top ten surveyed banks.  

CCB (Asia) recorded the largest relative decrease in gross loans, from HK$278 billion to HK$259 billion (down 6.9%) in 2025. This reduction was mainly driven by an 8.0% decline in loans to corporate customers⁹.

In contrast, CNCBI posted the largest increase, with gross loans rising from HK$229 billion to HK$246 billion (up 7.4%), fuelled by a 22.5% increase in loans to the financial services sector as well as a 15.2% growth in individual loans for the purchase of residential properties¹⁴.

HSBC’s gross loans and advances, which cover its Asia Pacific operations, increased by 4.3% to HK$3,682 billion, mainly due to an increase of 5.8% to HK$1,629 billion in personal lending, alongside an additional growth of 19.8% to HK$362 billion in loans to non-banking financial institutions¹⁰. 

BoC (HK)’s gross loan balances rose 2.3% to HK$1,721 billion, driven by a growth in mortgage loans and commercial loans of 5.2% to HK$472 billion and 2.8% to HK$692 billion, respectively¹⁵.

In 2025, Hong Kong’s banking credit quality remained manageable as risks from domestic commercial real estate sector were tempered by a recovering residential market. The impaired loan ratio¹⁶ for all surveyed banks decreased marginally from 2.15% to 2.14%, while for the top ten surveyed banks, it increased slightly from 2.07% to 2.14%. 

Among the top ten, CCB (Asia) posted the lowest impaired loan ratio at 0.31% in 2025, down from 0.33% in 2024, mainly due to write-offs (albeit to a significantly lesser extent compared with the previous year)⁹. 

In contrast, Hang Seng’s impaired loan ratio continued to rise from 6.12% in 2024 to 7.04% in 2025, the second largest increase among the top ten, primarily driven by an increase of 11.30% in credit-impaired corporate and commercial loans¹¹. 

DBS recorded the most significant year-on-year increase in its impaired loan ratio, rising from 1.36% to 2.29%. This surge was primarily driven by a 316% spike in impaired loans within the building and construction sector.

Six of the top ten surveyed licensed banks improved their impaired loan ratios in 2025. For Nanyang¹⁷, SCB¹⁸, ICBC (Asia)¹⁹ and CCB (Asia)⁹, the reduction was mainly attributed to write-offs of previously impaired loans. Meanwhile, CNCBI¹⁴ and BEA¹² also recorded improvements, driven by both growth in gross loan balances and write-offs. For ICBC (Asia), a decrease in new credit impairments was an additional contributing factor. 

While credit conditions remained relatively stable during the initial part of the year, asset quality softened slightly toward the end, as the gross classified loan ratio for the Hong Kong banking sector rose slightly to 2.01% by December 2025, up from 1.97% at the end of June 2025³. This downward trend was primarily driven by the commercial real estate sector, which faced persistent headwinds from high vacancy rates, while the retail sector’s recovery remained modest. Banks should therefore remain vigilant in managing credit risk and closely monitor the financial health of corporate borrowers operating in these vulnerable sectors.

On the retail side, many banks lowered their best lending rates twice between September and November 2025, reducing rates by a total of 25 basis points to follow the rate cuts by the U.S. Federal Reserve³. 

The turnaround in the residential property market helped drive a significant reduction in the aggregate value of residential mortgage loans in negative equity from HK$195.1 billion at the end of December 2024²⁰, to HK$105.4 billion by the end of December 2025²¹. The figure had reached HK$156.8 billion at the end of September 2025 around the time when the U.S. Federal Reserve’s first rate cut of the year alleviated borrowing costs. 

Most negative equity cases involved bank staff housing loans or mortgages under the Mortgage Insurance Programme, which allow higher loan-to-value ratios. This was evident in the mortgage delinquency ratio, which increased slightly from 0.11%²² in 2024 to 0.14% in 2025²³, though it remains low by historical standards. Banks’ residential mortgage loan portfolios continue to present low risk. 

Looking ahead through 2026, the credit quality outlook for Hong Kong’s banking sector is expected to remain nuanced, balancing external macroeconomic pressures against a stabilising domestic environment. The sector faces prominent headwinds from uncertainties surrounding global trade tensions, complex U.S. tariff risks, future U.S. interest rate movements and geopolitical risks (particularly the military conflicts in the Middle East). While these factors warrant continuous monitoring, they are unlikely to pose immediate concern to systemic stability. The Hong Kong banking sector continues to maintain strong capitalisation and solid liquidity positions, positioning it well to withstand near-term volatility and sustain resilience.

To navigate this landscape successfully and balance growth with stability, banks in Hong Kong must proactively implement stringent risk controls across vulnerable commercial sectors. They should also capitalise on emerging sector-led initiatives, such as the Commercial Data Interchange pioneered by the Hong Kong Monetary Authority, to drive innovation and expansion. At the same time, pursuing strategic portfolio diversification, alongside disciplined capital management and agile pricing strategies, will be essential in ensuring long-term resilience and sustainable performance.

Financial Results