2009 interim results for listed banks | KPMG | CN
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2009 interim results for listed banks

2009 interim results for listed banks


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KPMG in China


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Part I - Hong Kong 

Hong Kong listed banks1 

  • In an operating environment which remained challenging in 2009, Hong Kong listed banks earned a total of HKD 38.2 billion in net profit after tax for the first half of 2009; a fall of 17.7% over the same period last year. Excluding impairment charges on investments for both periods, profit before tax fell by 23%.
  • Net interest income fell 9.4% due to narrowing margins and loan contraction.
  • Net fee and commission income fell by 16.5% as demand for wealth management products remained weak.
  • Those listed banks which sold Lehman Brother's minibonds to their customers reached an agreement with the regulators to repurchase them from eligible customers. The amounts the banks will have to compensate customers under the repurchase arrangement is estimated at HKD 6 billion2. The ultimate loss to the banks will depend on the amount they can recover from the underlying collaterals of the minibonds.
  • Impairment charges on investments were lower than in prior periods as most banks have either disposed of or fully written down their problem investments. The charge for the first half of 2009 was at least HKD 2.8 billion2, compared with at least HKD 25.5 billion2 in 2008 and HKD 7.7 billion2 in 2007.
  • The impaired loan ratio rose to 1.09% at the end of June 2009 from 0.84% at the end of last year, while the net loan impairment charges for the first half rose 125%.
  • Capital adequacy remained strong under BASEL II.
  • The average liquidity ratio generally rose, as the supply of deposits continued to exceed loan demand.  


  • The Hong Kong economy remained weak in the first half of 2009. Real GDP contracted for three consecutive quarters, falling by 3.8% year-on-year in the second quarter, after a 7.8% year-on-year drop in the first quarter. Private consumption, fixed capital formation and trade all recorded declines while government consumption was the only category of GDP that expanded in the first half of 2009.
  • Thanks to a low interest rate regime, property prices rebounded in the second quarter of 2009, following a dive in the last quarter of 2008 and first quarter of 2009. Residential and office property prices on average fell by 5.3% and 14.2% on a year-on-year basis in June 2009. On the other hand, office rental prices remained weak and fell 18.3% year-on-year in June 2009 as more offices began moving out of higher-rent buildings in the central business district to other districts.
  • Fund raising in the first half of 2009 was only about 35% of that for the first half of 2008. IPOs have been quiet since August 2008 and only in June 2009 did the IPO appetite pick up. Stock trading volume as well as the Hang Seng Index (HSI) plunged in the first quarter but rebounded in the second quarter. The HSI rose from 14,388 at the end of 2008 to 18,379 at the end of June 2009. The stock trading volume for the first half of 2009 was 33% lower than the first half of 2008, and was about the same level as the second half of 2008.
  • Consumer prices dropped 0.9% year-on-year in June 2009, the first decline since January 2005. Excluding the one-off government relief measures, the consumer price index (CPI) would have risen 0.4%. Consumer prices continued to ease due to a weak economy but the rebound in the property market should help to prevent significant declines in the coming months.
  • The three-month period unemployment rate rose from a decade-low of 3.2% in the summer of 2008 to 5.4% in June and July 2009. This rise began to taper off in the second quarter of 2009. The latest bankruptcy data showed that more than 9,100 bankruptcy petitions were filed in the first half of 2009 45% more than in the second half of 2008 and 73% more than the first half of 2008. Nevertheless, this was still lower than the peak in 2002 when over 26,000 cases were filed that year.  


  • The US Federal Reserve cut its target interest rate to almost zero by December 2008 and has kept the interest rate at a low level since then in view of the weak economy. Commercial banks in Hong Kong also cut the prime rate to 5%-5.25% and trimmed the Hong Kong dollar savings deposit rate to 0.01% since late 2008.
  • The sector-wide net interest margin narrowed from 2.0% in the first quarter of 2008 to 1.62% in the first quarter of 2009. Deposit spreads declined as a low interest rate regime offered little room for the reduction of interest rates paid to customers. Mortgage pricing remained competitive. As residential property prices and turnover picked up in the second quarter of 2009, the mortgage battle intensified.
  • Authorised institutions in Hong Kong saw a drop in loans and advances to HKD 3.20 trillion in June 2009, a 4.3% year-on-year decline or a 2.5% decrease over the first half of 2009. Lending was generally more cautious in light of the deteriorating credit quality. Trade finance loans contracted the most at 29% year-on-year as trade remained weak in Hong Kong. Commercial loans remained at the same level as it was a year ago. In contrast, loans to stock brokerages soared 2.4 times year-on-year to HKD 49.9 billion as stock trading and IPO activity picked up in the second quarter of 2009.
  • Loan assets have deteriorated, though moderately. Bad debt charges represented 0.18% of the total average assets for retail banks in the fourth quarter of 2008 and first quarter of 2009. The gross classified loan ratio rose to 1.51% at the end of June 2009, up from 0.88% and 1.24% at the end June and December 2008. As for the retail portfolio, unsecured lending showed signs of deterioration as observed in the rising credit card charge off ratio, which climbed from 2.68% in the first half of 2008 to 4.17% in the first half of 2009. The mortgage portfolio on the other hand remained healthy despite the economic downturn. The 3-month mortgage delinquency ratio stayed at a low level of 0.05% in June 2009, the same as in December 2008.
  • In July 2009, the Hong Kong Monetary Authority and the Securities and Futures Commission reached an agreement with 16 distribution banks (including a number of listed banks) regarding the repurchase of minibonds from eligible customers. 

Balance sheet 

  • The listed banks grew their balance sheets and customer deposits by 7.2% and 11.4% year-on-year respectively while their loan books shrank by 2.2% over the same twelve months, due to weak demand and a reduced lending appetite. Moreover, loans rose by 0.6% over the first half of 2009.
  • The annual decline in loan books was mainly driven by a 37% year-on-year dive in trade finance loans and an 8.6% year-on-year drop in loans for use outside Hong Kong. Commercial loans on the other hand rose 10% year-on-year, supported by strong loan growth in the property development and stockbrokers sectors which rose by 25% and 5.6 times year-on-year respectively.
  • Average capital adequacy remained strong under BASEL II at 15.5%, compared to 14.1% at the end of December 2008.
  • Liquidity in the interbank market remained strong. Most listed banks saw an increase in the average liquidity ratio for the first half of 2009. The lowest average liquidity ratio was 36.5% which was still well above the regulatory minimum of 25%. 


  • Overall net profit for listed banks in the first half of 2009 fell by 17.7%. A low interest rate environment paired with a more selective lending appetite resulted in a 9.4% drop in net interest income. Fee and commission income fell by 16.5% also largely due to the reduced demand for wealth management products.
  • Net interest income remained the main component of income and fell on the back of shrinking margins. Net interest margin narrowed as deposit spreads markedly reduced as already near zero rates offered little room to reduce interest rates paid to customers.
  • Non-interest income rose 7.5% mainly due to lower investment write-downs. Excluding the effect of investment write-downs for both periods, non-interest income fell by 5.9%. Wealth management fee income fell by half while stock brokerage fee income fell 23%. However, excluding HSBC stock brokerage fee income only fell by 3.6%,due to the pick-up in the local stock market in the first half of 2009.
  • Based on disclosed information, total investment write-downs (including equity investments) amounted to at least HKD 2.8 billion in the first half of 2009, compared to at least HKD 8.2 billion in the first half of 2008.
  • Operating expenses rose only by 1.1% as banks worked hard to control costs. This included some provisions for the repurchase of minibonds.
  • Operating profit before loan impairment allowances fell by 6.0% while impairment charges on loans rose 125%.
  • We still saw fair value gains on properties as property prices picked up in the first half, though this revaluation gain was 46% lower than in the previous period. Contribution from associates and jointly controlled entities went up by 4.0% to HKD 3.8 billion. Most of these were contributions from mainland associated banks. Overall, profit before tax came down by 16.6%.  

Asset quality 

  • A weak economy led to more credit downgrades in the loan portfolios, bringing the impaired loan ratio to 1.09% from 0.84% at the end of December and 0.54% at the end of June 2008. Gross impaired loans surged 97% year-on-year from HKD 15 billion at the end of June 2008 to HKD 22.6 billion at the end of 2008, and then climbed to HKD 29.5 billion at the end of June 2009. However, the absolute level of impaired loans remains very low.
  • Net loan impairment charges for listed banks rose by 125%. Net individually assessed increased 6.9 times. Net collectively assessed charges rose 54%. The rise in credit card delinquencies as well as historical loss rates led to higher impairment charges on the collectively assessed portfolio.
  • The allowance coverage for impaired loans was 41% at the end of June 2009, compared with 44% and 37% at the end of December and June 2008. Loan impairment allowances are not 100% provided as they are made after taking into account collateral values and other expected recoveries.
  • Investment impairment has affected the listed banks' results over the past two years. Moving into 2009, we saw a further write-down of HKD 2.8 billion in the first half, mainly on equities, debts and other structured products. Most listed banks holding toxic financial assets had either disposed of them or fully written them down by the end of June 2009. The net carrying value of the impaired investment portfolio at the end of June 2009 was around HKD 12.4 billion, mainly in one listed bank. 

Part II - Mainland China3

Mainland China listed banks 

  • The mainland listed banks registered a 3.1% decline in net profit to RMB 226 billion for the first half of 2009 due to a narrowing interest spread, though this was partly offset by strong loan growth, smaller investment write-downs and fee income growth.
  • Net interest income fell 10.0% on the back of narrowing interest spread.
  • Net fee and commission income rose 9.5%. Fees from wealth management and fund agency services dropped as the domestic capital markets were still recovering from the global downturn. This was offset by strong income growth in fee income earned from bank cards and consultancy, advisory and investment banking services.
  • Impairment write-downs on investments in the first half of 2009 amounted to RMB 6.4 billion, which was a significant drop from the RMB 18.3 billion booked in the first half of 2008.
  • Operating expenses fell by 0.5% as staff costs dropped.
  • The non-performing loan (NPL) ratio fell to 1.53% at the end of June 2009 from 2.04% at the end of 2008 due to loan growth as well as a decline in NPL balances. The ratio of loan allowances to NPL reached 148%, up from 134% six months ago. Impairment charges on loans fell by 7.1% as net individual charges decreased.
  • All listed banks were well capitalised with their capital adequacy ratios (CAR) above the minimum ratio of 8%, though the average CAR fell to 11.5% at the end of June 2009 due to a strong loan growth of26% over the first half of 2009.  


  • Mainland China's economy expanded by 7.1% in the first half of 2009, helped by the government's loose monetary policy and stimulus spending. Export revenue dropped by 22% in the first half of 2009. Investment was the driving force behind the GDP growth, amid a surge in government-supported infrastructure spending. The external sector continued to act as a drag on the economy, owing to a sharp decline in exports.
  • The consumer price index dropped by 1.7% year-on-year in June 2009, marking the fifth consecutive month of deflation and prices have fallen by an average of 1.1% over the first half of 2009. Given that external demand remained weak, production overcapacity will continued to be channelled into the domestic market, keeping price competition intense.
  • Retail sales growth by value remained strong in June 2009 at 15.0% year-on-year, helped by government social-support programmes. Retail sales continued to be supported by demand for vehicles, which has been boosted by tax incentives for sales of cars with smaller engines and by subsidies for the purchase of farm and utility vehicles.
  • The government's stimulus package and the credit boom helped the housing market to rebound. By August 2009, housing prices in mainland's 70 biggest cities have risen at their fastest pace in 11 months, after record levels of lending and reflecting rising confidence. House prices rose 0.2% year-on-year and 2% year-on-year in June and August 2009 respectively.
  • The stock market began to pick up in the first quarter of 2009, following a slump in 2008. IPO activity was halted in September 2008 but resumed again in late June 2009. The Shanghai and Shenzhen A-share indices rose 63% and 74% respectively, from 1,912 and 582 at the end of 2008, to 3,107 and 1,010 at the end of June 2009. The aggregate stock trading volume in the Shanghai and Shenzhen stock exchanges rose 31% over first half of 2008 or 1.3 times over second half of 2008.
  • The RMB exchange rate remained stable during the first half of 2009 and has appreciated 0.04%, 0.19% and 6.37% against US dollar, the Euro and Japanese Yen over the period. 


  • In the second half of 2008, the PBOC cut the Renminbi deposit ratio four times to ensure sufficient liquidity in the banking system as the global financial crisis worsened. In late September 2008, the PBOC began to apply different reserve ratios for the bigger and smaller banks. The reserve ratio for small and medium-sized banks reached 13.5% while that for the larger banks was 2% higher at 15.5% by the end of 2008. Since then, the reserve ratios remained unchanged over the first nine months of 2009.
  • The interest rates remained unchanged in the first eight months of 2008, but in the last four months of 2008, the PBOC lowered the benchmark interest rate five times. The one-year benchmark deposit rate was cut by a total of 189 basis points to 2.25% while the one-year benchmark lending rate was cut by 216 basis points in total to 5.31%. The savings deposit rate was cut by 36 basis points to 0.36%. Since then, interest rates remained unchanged during the first six months of 2009. As lending rates decreased faster than deposit rates, the cut in interest rates put significant pressure on the net interest spread.
  • Total Renminbi and foreign currency deposits rose 29% year-on-year by June 2009, or 21% for the first half of 2009 to RMB 58.1 billion. The deposit growth was broad-base across individuals and corporates. Liquidity remained ample as financial institutions were still keeping excess deposit reserves at the central bank. The excess deposit reserve ratio maintained by the financial institutions at the end of June 2009 was 1.55%, though lower than 5.11% kept at the end of 2008.
  • Total Renminbi and foreign currency loans grew by 33% year-on-year, or 24% over the first half of 2009 to RMB 39.8 trillion at the end of June 2009 on the back of government's stimulus plans. Personal loans grew by 19% over the first half of 2009 to RMB 6.8 trillion. The growth was partly attributable to the recent recovery in property market which boosted mortgages. Corporate loans, including discounted bills, grew by 25% over the first half of 2009 to RMB 33 trillion. The growth was mainly supported by medium and long-term loans growth, where new loans were mainly granted to infrastructure, leasing, commercial services and real estate industries.
  • The non-performing loan (NPL) ratio of commercial banks improved to 1.77% at the end of June 2009, from 2.45% at the end of 2008 due to both rapid loan growth as well as an 8.8% decline in NPL balance over the first half of 2009. Commercial banks continued to set aside allowances for loan losses. The ratio of total allowances to NPL improved to 134.3% at the end of June 2009, from 116.4% at the end of 2008. 


Balance sheet 

  • The mainland listed banks achieved balance sheet and loan growth of 29% and 34% year-on-year to reach RMB 41.7 trillion and RMB 21.8 trillion respectively. Corporate loans and personal loans grew by 27% and 22% while discounted bills surged 215%. Most of the loan growth actually happened in the first half of 2009 on the backdrop of government's economic stimulus package, growing at 26% over the 2008 year end balance.
  • Personal loans accounted for 18.7% of total loans and the growth was mainly supported by mortgage lending which grew by 22% over the last 12 months. Similar to corporate loans, most of the growth in mortgage books took place in first half of 2009 where mortgages grew by 17% over the last six months. Credit card loan growth was less concentrated in the first half of 2009. It grew by 66% on year-on-year basis, or 15.6% over the last six months. Credit card still accounted for less than 1% of the total loans in mainland.
  • The deposits with central banks rose by 18.3% over the last 12 months or fell 0.9% over the first half of 2009. The statutory deposit reserves with PBOC actually went up 19.7% over the first half of 2009 to match with a 21% rise in customer deposits whilst the PBOC kept the statutory deposit reserve ratios unchanged since the end of 2008. On the other hand, the surplus deposit reserves with the PBOC came down by 48%. As demand for lending was strong in the first half, more banks were trimming down the voluntary deposits at PBOC.
  • Customer deposits rose 32% year-on-year to RMB 33.2 trillion at the end of June 2009. Savings deposits accounted for 48% of total deposits, same as that at the end of 2008. The loan to deposit ratio improved to 65.6% at the end of June 2009, up from 63.1% at the end of 2008.
  • The listed banks were well still capitalised as they had all achieved the minimum CAR standard of 8%. The average CAR of all listed banks fell to 11.5% at the end of June 2009, from 12.6% at the end of 2008 as loan growth put pressure on CAR.  


  • The mainland listed banks continued to post strong results, with net profit after tax dropping by 3.1% to RMB 226 billion due to narrowing of interest spread though partly offset by strong loan growth. A smaller investment write-downs together with fee income growth also helped to offset the decline in net interest income. Operating profit before loan impairment allowances fell by 3.7%.
  • In 2007 and 2008, at least RMB 23.4 billion and RMB 62.5 billion in investment write-downs were booked as the global financial crisis deepened. As we move into 2009, investment write-downs decreased. About RMB 6.4 billion of investment impairment was booked in the first half of 2009, smaller than RMB 18.3 billion booked in the first half of 2008. Most of the write-downs were made by a few large-sized listed banks.
  • Net interest income fell by 10.0% to RMB 418 billion despite strong loan growth. Yields on customer loans and deposits narrowed due to the cumulative effect of interest rate cuts towards the fourth quarter of 2008. On average, the lending yields and deposit yields for the first half of 2009 fell by approximately 1.8% and 0.5% respectively, compared with the first half of 2008. Based on disclosed information, the average annualised net interest margin came down to 2.30% in the first half of 2009, compared with 3.00% for full year of 2008 and 3.13% for the first half of 2008.
  • Net fee and commission income rose 9.5% to RMB 92 billion. Bank card fees rose 34% as the banks continued to grow the number of bank cards. Consumer spending through bank cards and transactions through self-service facilities continued to increase. Consultancy, advisory and investment banking fees, mainly earned by state-owned banks, rose 48% due to expansion of investment banking and financial advisory services. On the other hand, agency services fee decline. Fees earned from fund agency services shrank as the domestic capital markets were still recovering from global downturn.
  • Operating expenses fell by 0.5% to RMB 202 billion, within which staff costs fell by 6.7% while premises and equipment related expenses rose about 17%. The cost to income ratio was 38% for 1H09, slightly higher than 37% for 1H08. The cost to income ratio for banks listed in China only was at 41% for 1H 09, down from 42% for 1H 08. 

Asset quality 

  • Loan impairment charges fell by 7.1% to RMB 43 billion partly due to an overall decline in both NPL balance and NPL ratio. Net individually assessed charges fell by 71% partly because additional loan provisions were made in last year's first half following the Sichuan earthquake. Net collective charges rose 6.5% as banks continued to set aside adequate provisions in view of a global slowdown, and raised the NPL coverage ratio.
  • The NPL coverage ratio, measured by total loan allowances to NPL, reached 148% at the end of June 2009, up from 134% at the end of 2008. For banks listed in China only, the provision coverage ratio reached 184% at the end of June 2009, up from 171% at the end of 2008.
  • NPL ratio continued to improve on the back of loan growth and lower gross NPL, dropping to 1.53% at the end of June 2009 from 2.04% at the end of 2008. The decline was observed across almost all banks, and by the end of June 2009 all listed banks achieved an NPL ratio of less than 2%. Gross NPLs also fell by 4.8% year-on-year, or 5.7% over the first half of 2009, although the decline was more apparent at the bigger banks.
  • The remaining net book value of the impaired investment portfolio was at least RMB 63 billion, based on disclosed information. The recovery of the global economy as well as the credit market will determine whether these assets deteriorate further, or whether more assets will become impaired in 2H09. 

Commenting on the Hong Kong listed banks' results, Martin Wardle, partner in
charge of KPMG's Financial Services practice in Hong Kong, said:

"The operating environment remained challenging in the first half of 2009 with real GDP contracting by 3.8% year-on-year in the second quarter, after a 7.8% year-on-year drop in the first quarter. Hong Kong listed banks still earned a total of HKD 38.2 billion in net profit after tax for the first half of 2009, though profit fell 17.7% over the first half of 2008. Net interest income remained the main component of income, falling by 9.4% on the back of narrowing margins and shrinking loan books. Net fee and commission income fell 16.5% as well, mainly due to a dive in wealth management business. Investment sentiment in wealth management products remained weak as global markets remained uncertain and volatile. 

In addition, there was lower investor interest following the mis-selling investigations which took place following the failure of Lehman Brothers. Many listed banks were involved in the distribution of minibonds, a structured product arranged by Lehman Brothers whose value and recoverability were impacted by the firm's bankruptcy. These listed banks together with other minibond distribution banks have reached an agreement with the regulators on the repurchase of these minibonds from eligible customers. Based on disclosed information, the initial amount involved in the repurchase arrangement was estimated to be approximately HKD 6 billion. The ultimate loss to the banks on the repurchase scheme will depend on the amount they can recover from the underlying collaterals of the minibonds." 

Simon Donowho, a partner in KPMG's Financial Services practice, commented: 

"The economic downturn which started when the global financial crisis hit in 2008 continued to lead to some corporate failures as well as personal bankruptcies, bringing the impaired loan ratio to 1.09%, up from 0.84% at the end of 2008. Net loan impairment charges rose by 125%, with net collectively assessed charges rising by 54% and net individually assessed charges surging 6.9 times. While the delinquency ratios for listed banks are not accelerating quickly, lenders should still keep close contact with their loan customers and respond quickly to early signs of liquidity problems in order to minimise bad debts. 

Hong Kong, as a special region of China, has been selected to participate in a pilot scheme for the use of Renminbi in settling cross-border trade transactions between the mainland and Hong Kong. The scheme will expand Renminbi business in Hong Kong and create more opportunities for the banks. In the first eight months of 2009, two mainland-incorporated foreign banks sold Renminbi-denominated bonds in Hong Kong for the first time and they were both subsidiaries of Hong Kong lenders. In late September, China sovereign Renminbi bonds were also sold in Hong Kong, marking China's first sovereign bond sale outside the mainland. The sale will strengthen the development of the offshore Renminbi business in Hong Kong." 

Commenting on the Mainland listed banks' results, Joan Ho, partner in charge of KPMG's Financial Services practice in southern China, said:   

"Mainland China listed banks achieved a 3.1% decline in net profit after tax to RMB 226 billion despite the economic challenges. A reduction in the interest rate towards the last quarter of 2008, as well as a surge in discounting bills business which carried lower yields, put significant pressure on the interest margin, though this was partly offset by strong loan growth in the first half of 2009. Net interest income still fell 10.0%.   

Non-interest income grew 39% thanks to fee income growth as well as smaller investment write-downs. Fee income earned from bank cards, consultancy, advisory and investment banking services remained strong, offsetting the slowdown in wealth management and agency fee income. To strengthen the operation of wealth management business in the commercial banks, in July 2009 the regulator requested the banks to classify customers based on their risk tolerance and investment experience. In addition, the commercial banks should not use funds raised from wealth management products to invest in risky financial products or overly-complex structured products.   

Write-downs on impaired investments had a small impact on the overall results in the first half of 2009. Based on disclosed information, listed banks in mainland China wrote down investments by at least RMB 6.4 billion in the first half of 2009, compared with at least RMB 62.5 billion and RMB 23.4 billion booked in 2008 and 2007. The net carrying value of impaired investments was at least RMB 63 billion at the end of June 2009. The recovery of the global economy as well as the credit market will determine whether these assets deteriorate further."   

Ivan Li, a partner in KPMG's Financial Services practice in Shenzhen, commented:   

"Loan quality remained healthy with an overall decline in both NPL ratio and NPL balances over the first half of 2009. The NPL ratio for mainland listed banks came down to 1.53% at the end of June 2009, from 2.04% at year end 2008. The average loan provision to NPL ratio reached 148% at the end of June, up from 134% at the end of 2008. Though the banks have not suffered significantly from the global recession in the first half of 2009, there are still uncertainties on the remainder of the year as the world's economy has not recovered. Given the strong loan growth in the first half of 2009, the banks have now got a bigger loan portfolio to manage. It is critical for the banks to monitor on an on-going basis that loans were drawn for its intended purpose and not flowing into speculative activities. The credit risk management processes at branch and head office levels and overall credit risk management remains critical.   

Loan books grew by 26% over the first half of 2009. A decline in capital adequacy ratio (CAR) among the listed banks might slow down loan growth in the remainder of the year. In September 2009, the China Banking Regulatory Commission proposed to adjust the calculation of CAR which would prevent banks from counting mutual holdings of subordinated bonds as part of their capital base. The proposed rule was aimed at improving the quality of the banks' capital. The new rule would post pressure on CAR for the listed banks." 


- End -


1. The 13 Hong Kong banks included in our analysis are BOC Hong Kong (Holdings), The Bank of East Asia, CITIC Ka Wah Bank, Chong Hing Bank, Dah Sing Banking Group, Fubon Bank (Hong Kong), Hang Seng Bank, Hongkong and Shanghai Banking Corporation, ICBC (Asia), Public Financial Holdings, Standard Chartered Bank (Hong Kong), Wing Hang Bank and Wing Lung Bank.

2. Disclosed information refers to results announcements and media reports. 

3. The 14 mainland banks included in our analysis are: Bank of China, China Construction Bank, Bank of Communications, China CITIC Bank, China Merchants Bank, and Industrial & Commercial Bank of China which are listed in both Shanghai and Hong Kong stock exchanges, and also Bank of Beijing, Bank of Nanjing, Bank of Ningbo, China Minsheng Banking, Huaxia Bank, Industrial Bank, Shanghai Pudong Development Bank, and Shenzhen Development Bank which are listed in the Shanghai stock exchange.



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