HONG KONG MONETARY AUTHORITY Annual Report 1996
HONG KONG MONETARY AUTHORITY
BUOYANT GROWTH IN OPERATING INCOME
Despite the more moderate underlying profit growth, the local banking sector enjoyed buoyant growth in operating income (18.3% compared with 17.5% in 1995) on the back of the increased margins and the recovery in domestic lending described above. Moreover, healthy growth in income from foreign exchange operations, fees and commissions and other operating income also made a significant contribution. In addition, as the growth in operating income exceeded the 13.6% growth in operating expenses, the cost-income ratio further improved from 39% in 1995 to 37% in 1996.
| Table 5: | |
| CREDIT CARD SURVEY RESULT* | |
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| Total Credit Card Receivables | $25.2 billion |
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| Delinquent Accounts | $0.2 billion(0.87% of total receivables) |
| (debts overdue for > 90 days) | |
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| Annualised Charge-off Ratio (debts written off as a % of total receivables) |
2.3% |
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| *End - December 1996 figures. | |
BAD DEBT CHARGE UP
Due to the slow growth in the local economy and the financial difficulties encountered by a number of listed companies, the bad debt situation of the banking system deteriorated quite sharply in the first half of 1996 although the level of provisions was still low by international standards. As a percentage of average total assets, the bad debt charge for local banks more than doubled from 0.08% to 0.18% over the year. However, this was from a very low base and appeared to be largely due to financial difficulties affecting only a relatively small number of listed companies.
CREDIT CARD BUSINESS
As losses arising from credit card receivables are a sensitive indicator of deteriorating credit quality, the HKMA introduced a monthly survey in January 1996 to collect credit card statistics from 17 authorised institutions which are major players in credit card business.
Charge-off figures obtained from the survey are high compared to the loss experienced in the rest of the loan book (Table 5). However, they are lower than the comparable figures in other more mature credit card markets. In addition, there has been no indication of a general deterioration in the quality of credit card portfolios during the year.