The Hong Kong Monetary Authority's "Report on the Half-Yearly Monetary and Financial Stability Situation" shows that in the first half of the year, the overall pre-tax operating surplus of local retail banks increased by 6.2% year-on-year. The return on assets rose from 1.13% to 1.18%. However, due to the continued impact of maintaining high borrowing costs, the demand for bank loans remained weak in the first half of the year, leading to a deterioration in the quality of loan portfolio assets.

The report indicates that, on a half-yearly basis, the total amount of loans and advances granted by all authorized institutions decreased by 1.9% in the first half of the year. The decline in the total loan amount was due to reductions in local loans and loans used overseas in Hong Kong. Specifically, following respective declines of 2.0% and 6.2% in the second half of last year, local loans and loans used overseas in Hong Kong further decreased by 0.9% and 5.1% in the first half of this year.

In the first half of the year, the total specific classification loan ratio of all authorized institutions increased from 1.57% at the end of last year to 1.89% at the end of June this year. Similarly, the overdue and restructured loan ratio of all authorized institutions increased from 1.24% at the end of last year to 1.52% at the end of June this year. Despite the increase in the total specific classification loan ratio for the Hong Kong banking industry, the asset quality remains at a healthy level.

Looking ahead, the authorities point out that against the backdrop of the possibility of the specific classification loan ratio trending towards the historical long-term average level of 2%, uncertainties exist in the direction of US monetary policy interest rates. Coupled with geopolitical fragmentation, this will continue to pose challenges to the Hong Kong banking industry. Given the impact of the high interest rate environment on corporate debt repayment ability, banks need to remain vigilant in managing the impact of relevant risk factors on the quality of their loan portfolio assets and continue to maintain adequate provisions.