Hong Kong banks' NIM slid down to 1.41% in 3Q13

Here is what to blame.

According to Maybank Kim Eng, the net interest margin (NIM) of retail banks’ Hong Kong offices edged down from 1.43% in 2Q13 to 1.41% in 3Q13 (1.41% in 1H13).

They believe this was due to the slight increase in average HKD composite interest rates (the proxy of HKD funding cost) from 0.28% in 2Q13 to 0.32% in 3Q13.

Here's more from Maybank Kim Eng:

In our view, only small local banks and foreign banks, which have smaller deposit bases, may bear slight NIM pressure in 3Q13.

We have projected slight NIM pressure for most Hong Kong-listed banks in 2H13 vis-à-vis 1H13.

With USD short-term interest rates likely to remain stable in 2014, we see limited downward pressure on the banks’ NIM. Rather, Hong Kong banks may ride the steepening US yield curve to improve their NIM