Hong Kong's 20 largest licensed banks in 2017

Hong Kong’s connection with the mainland may be its best asset yet.

Hong Kong’s banking scene has been replete with people movements over the course of the last year, with quite a number of large banks reducing headcount. The Bank of East Asia Ltd, Hang Seng Bank, and Citi Hong Kong, for instance, cut their talent pools by 14%, 6.85%, and 6.87% respectively, in the midst of massive digital disruptions entering the financial landscape of the city. 

However, the total number of employees in Hong Kong’s twenty largest banks has increased by a significant number as well, owing to HSBC’s expansion of its talent pool by 37% from last year in a move to dominate the financial services industry and find more ways to collaborate with non-traditional players. The only bank with a significant increase in talent, HSBC remains on top of the digital game, trailblazing in areas such as robotics, artificial intelligence, and blockchain. As the mainland develops into a major fintech hub, Hong Kong’s top banks are leveraging their capabilities, pouring in greater investment, and expanding their digital spaces to accommodate new technology and transform their
talent pool’s compositions.

Raymond Ch’ien, chairman, Hang Seng Bank, said that the upward trend in the global economy brought greater stability to Hong Kong’s operating environment over the past months. For Hang Seng, and probably for other banks with the same reach and coverage, future international trade flows, the evolving credit conditions, and the impact of the ongoing economic transition on the mainland will continue to create challenges and cast uncertainties.

Capitalising on cross-border

Hong Kong’s major banks remain glued to China and hinge even greater portions of their business to the mainland by tightening cross-border relationships and increasing the
number of services being exchanged. Banks in the city are fully aware of their significant and privileged position, given Hong Kong’s role as an economic bridge between China
and the rest of the world. The city is also trying to move with the times as regulators loosen up and find ways to ensure that policy does not hinder development in the highly competitive Hong Kong market. 

Chinese enterprises are increasingly going global and banks can tap into this opportunity to strengthen their cross-border and cross-business initiatives. Recently, HSBC and BOC launched cross-border SME financing and payment services in order to speed up exchanges between Hong Kong and China and eventually, other parts of the world. According to
Yi Huiman, chairman of ICBC, the cross-border financial business is set to become an important development direction of the banking industry for Hong Kong, especially for Chinese banks. 

HSBC developed HSBCnet, its digital banking platform for SMEs in Guangdong, allowing faster payment services with Hong Kong. BOCHK, on the other hand, supports “BOC Global SME Cross-Border Investment Matching Service”, a platform that aims to promote investment, technology exchange, and trade cooperation among SMEs in the mainland,
Hong Kong and overseas. The platform helps SMEs tap into business opportunities arising from the China’s Belt & Road national strategy. 

“ICBC has captured the development opportunities presented by burgeoning crossborder business to become the first commercial bank able to offer around-the-clock RMB clearing and trading services in Asia, Europe, and the United States and created the cross-border products,” Yi added. China’s implementation of the Belt & Road initiative is its
way of building closer economic, trade, and investment relationships with countries and regions along the route. Yi said that the scale of the capital and trading-related cross-border financial business and level of business will expand and deepen as a result of these developments.

“With Hong Kong’s role as the ‘super-connector’ bridging countries along the Belt and Road route and Mainland China, massive cross-border financial business can be processed via the Hong Kong market and financial services platform,” Yi added. HSBC is also growing its business around the Belt and Road route, and has inked energy sector deals linking China to Malaysia and Egypt. Meanwhile, Chi’en added that Hang Seng’s strong cross-border and crossbusiness connectivity remained key competitive advantages in capturing new business and ensuring that the bank is well-positioned for sustainable long-term growth. Despite tightening interest margins due to the rise in the cost of renminbi funding, Hang Seng China recorded solid growth in its balance sheet and maintained good cost control.

“Initiatives to strengthen our mainland investment services proposition were reflected in increased sales of retail investment funds. We also began manufacturing funds on the Mainland. In April, Hang Seng Qianhai Fund Management Company Limited, our foreign majority-owned joint venture fund management company, launched its first public fund. With the growth in net operating income outpacing the increase in operating expenses, we recorded a 2.9-percentage-point improvement in our cost efficiency ratio which, at 29.8%, is one of the lowest in the banking industry in Hong Kong,” Chi’en added. With stronger crossborder connections and expanding businesses, banks are pushed to increase their investments in the digital space in order to speed up their services. Lags have hounded developments in Hong Kong’s digital banking industry primarily due to regulation, and yet banks have not failed to come up with innovative solutions tailored to meet the needs of its clients.

The demands of digital

“We continued to upgrade our digital banking services with the aim of delivering a more efficient and user friendly experience. We revamped our Business Internet Banking platform to expand our ability to provide a wide range of time-to-market products. Through our Business Banking mobile app, customers can now upload documentation for loan and card applications. We have also extended auto-enrolled SMS notification services on inward/outward remittance telegraphic transfers to Mainland and overseas customers,” Chi’en said. 

Hong Kong’s banks are also exploring the much talked about world of business analytics. For instance, Hang Seng has leveraged its customer segmentation strategy to deepen customer relationships based on needs-based selling. By engaging its customers and ensuring that their needs are met, Hang Seng has driven business growth and grown its
customer base in Hong Kong by 25% over the course of one year. 

Stuart Gulliver, group chief executive of HSBC added they launched a research and development lab in partnership with the Hong Kong government to promote technology development for the financial sector. Areas of focus include biometrics, data analytics, cybersecurity and internet finance. “Separately, we are developing a mobile application to help retail customers manage all of their finances more effectively through a single interface,” Gulliver said. As banks explore the evolving world of digital, they are also looking for ways to bring innovation to every customer possible. ICBC (Asia) recently launched My Life, its local e-Commerce platform which serves to provide a more diverse sales channel and services to local enterprises. ICBC (Asia) felt it was strategic to begin with the launch of the “Pet” section, which connects local petrelated merchants and consumers.

According to Wu Xiang Jiang, head of the electronic banking department, My Life is a comprehensive local e-Commerce platform facing all the customers in Hong Kong by targeting specific markets with personalized services. “ICBC will assist the enterprises to bloom in the “Internet Plus” era and is committed to making contributions to promoting Hong Kong’s economic development, the improvement of people’s livelihood and society,” Wu said.