Mortgage loans likely to shrink 4% by 2014

As more cooling measures will be rolled out.

According to Barclays, despite the government's residential property cooling measures, property prices rose by 21% (Centa City Index) while system mortgages rose by 8% in 2012. 

It raised its mortgage growth estimate up from -5% to 0% in FY13E reflecting a less pessimistic (though still conservative) near-term outlook on the property market.

Here's more from Barclays:

We maintain our -4% mortgage contraction in FY14E factoring in potentially more cooling measures by the government.

We raise our FY12-FY14 earnings estimates by 0-5% on average reflecting 1-2bp higher margins and slightly higher loan growth (6% in FY13E vs 5% previously, for our less conservative mortgage outlook).

Our FY13-14E forecasts are still 2-11% below Bloomberg consensus on average. For Hang Seng Bank, we incorporate a one-off accounting gain of HK$9.5bn in FY13E for de-recognition of Industrial Bank as an associate.

We raise our 12-month price targets for the Hong Kong banks by 2-29% based on our unchanged blended valuation methodology, higher earnings forecasts and incorporating a premium for potential corporate action for the small- to medium-sized Hong Kong banks.