The Zhitong Finance App learned that UBS Global Research has pointed out that the profit prospects of the Hong Kong banking sector continue to improve, driven by the restart of the Federal Reserve's interest rate hike cycle, recovery in loan demand, and stabilizing asset quality. The year-on-year growth rate of system loans has accelerated from 2.3% in 2025 to 8.4% in August 2026.
Li Heqing, a financial industry analyst in Greater China at UBS Global Research, said that the bank expects the Hong Kong banking sector to resume positive revenue growth from 2026 to 2027, supported by rising interest rate prospects, recovery in loan demand, and falling credit costs. Furthermore, the commercial real estate market in Hong Kong has gradually stabilized, and rents for office buildings and core stores have improved, helping to reduce the pressure on bank credit risk. As credit costs gradually return to normal levels and in line with improved revenue growth, UBS expects the Hong Kong banking sector to regain positive revenue growth from 2026 to 2027, and there is room for further profit increases.
Li Heqing believes that the Hong Kong banking sector benefits from interest rate hikes and trade demand, and profit growth prospects are steady. The market currently expects the Federal Reserve to raise interest rates by a total of 75 basis points by the end of 2027. The one-month Hong Kong interbank interest rate rose from 2.53% in the first half of 2026 to 2.77% in the third quarter of 2026, and has remained around 2.9% so far in the fourth quarter. The bank expects the net interest spread to expand further, and net interest income will increase, and the increase in interest rates has not weakened demand for loans. The year-on-year growth rate of systemic loans accelerated from 2.3% in 2025 to 8.4% in August 2026, mainly driven by trade-related activities, providing additional support for revenue growth.
Li Heqing pointed out that the bank expects the profit contribution from the increase in net interest income and loan growth to exceed any loss caused by trading securities in terms of market value. Furthermore, the stabilization of commercial real estate fundamentals in Hong Kong (reflected in improvements in office and core store rents) will help promote the gradual normalization of credit costs and further support the upward trend in profits. As a result, the bank expects the industry's revenue to resume positive growth in 2026-27.