Hong Kong Banks Perform Well Despite SARS Shock Say Goldman

by Mary Swire, Tax-News.com, Hong Kong

20 June 2003

Despite the devastating impact of SARS (Severe Acute Respiratory Syndrome) on virtually every aspect of the Hong Kong economy in recent months, the territory's banking sector has held up remarkably well compared to its regional competitors, according to investment bank Goldman Sachs.

Speaking at a Hong Kong Securities Institute seminar on Wednesday, the bank's head of Asia-Pacific Financials, Roy Ramos, suggested that this was largely due to strong liquidity, asset quality and capital adequacy. "Despite 54 months of deflation, despite SARS and despite the war, Hong Kong banks have held up very well. One of the things the SARS outbreak shows us is the strong operating and regulatory environment in Hong Kong," Ramos observed.

A major factor behind the buoyancy of the jurisdiction's banking sector was its ability to earn attractive yields in the inter-bank market Ramos explained, adding: "They don't even need to make a loan to make money, they only have to take deposits." He also cited high dividend yields offered by banks at levels of around 5% to 6%. "You can't underestimate the importance of dividend yield," said the Goldman representative. "It floors the share price."

Ramos also noted significant opportunities in the Chinese banking market, particularly in the mortgage lending sector which he said was well regulated, offered good returns and low credit costs.

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