HSBC, Standard Chartered, BOCHK leave interest rates alone as borrowers eye relief later this year

HSBC, Hang Seng Bank, and BOCHK are keeping their prime lending rates unchanged at 5.875 per cent, paying 0.875 per cent per annum for deposits
Standard Chartered Bank also said it would keep its prime lending unchanged at 6.125 per cent

Banking & finance

Enoch Yiu

Published: 12:21pm, 21 Mar 2024

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Hong Kong’s three note-issuing banks – HSBC, Standard Chartered, and Bank of China (Hong Kong) – announced on Thursday that they will keep their lending and deposit rates unchanged after the city’s monetary authority followed suit with the US Federal Reserve in keeping interest rates at their current level.

The status quo stance means businesses and mortgage borrowers will have to wait until at least later this year for interest-rate relief as the economy struggles to crawl out of a stubborn slump.

BOCHK, alongside HSBC and its subsidiary Hang Seng Bank, kept their prime lending rates unchanged at 5.875 per cent, paying 0.875 per cent per annum for saving deposits over HK$5,000 and nothing to those below the threshold, the banks said in separate statements on Thursday.

Standard Chartered Bank also said it would keep its prime lending rate unchanged at 6.125 per cent, paying 0.875 per cent per annum for all saving deposits over HK$1.

The Chinese national flag is seen among buildings in Hong Kong’s Central district, including the HSBC headquarters (right) and Bank of China building (left). Photo: AFP

The Hong Kong Monetary Authority (HKMA) left the city’s base rate at 5.75 per cent on Thursday morning, hours after the Federal Reserve kept its target range at 5.25 to 5.5 per cent in its second policy decision of the year.

The HKMA has followed the Fed’s rate decision in lockstep since 1983 by design under its linked exchange rate system to preserve the local currency peg to the US dollar.

The pause, the fifth in a row since the last rate rise in July, confirmed the end of the rate rise cycle that began in March 2022. Analysts now expect the first rate cut from the Fed and the HKMA to start in June or July, with commercial banks lowering their rates later this year or earlier next year.

The Fed is expected to cut its key rate four times this year for a reduction of a full percentage point, said Kelvin Lau, senior economist of Greater China at Standard Chartered Bank.

Hong Kong’s interest rate should follow the cut, but by a smaller margin, with the Hong Kong interbank rate, or Hibor, falling by about 70 basis points by the end of 2024, he said. Commercial banks may also cut their prime rates two times by about 12.5 basis points each, Lau added.

HKMA urges borrower caution on interest-rate outlook

“A lower funding cost will be positive to the property market and the overall economy of Hong Kong,” Lau said in a telephone conference on Thursday. “The expected rate cut later this year, and the Hong Kong government’s removal of property curbs last month, will both encourage property transactions.”

“Companies will be more willing to borrow money at a cheaper funding cost to expand their business. The rate cut will also lead investors to shift their investments from US dollar assets to emerging markets in Asia and Hong Kong.”

Hong Kong commercial banks raised their prime rates five times since September 2022 by a total of 87.5 basis points to the highest since 2007.

Bank of China (Hong Kong), HSBC and its subsidiary Hang Seng Bank last raised their prime rates in July by 12.5 basis points to 5.875 per cent. The rate at Standard Chartered, Bank of East Asia, Citigroup, and CCB Asia increased by the same margin to 6.125 per cent.