The logo of HSBC is seen at the entrance of the HSBC Main Building in Central, Hong Kong, on Nov 8, 2023. (GARY CHIU / CHINA DAILY)

The Hong Kong banking sector remains resilient, underpinned by strong capital and liquidity buffers, with an increase in aggregate pre-tax operating profit of retail banks offset by the uptick in classified loan ratio.

According to Hong Kong Monetary Authority Quarterly Bulletin, the aggregate pre-tax operating profit of the city's retail banks increased 88.8 percent year-on-year in the first three quarters, driven by an increase in net interest income, coupled with increases in income from investments held for trading and income from foreign exchange and derivative operations, but was partly offset by an increase in loan impairment charges.

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Against the backdrop of rising interest rates, the net interest margin of retail banks widened to 1.68 percent in the first three quarters, compared to 1.17 percent from a year ago.

A ferry boat sails across the Victoria Harbour on Sept 7, 2023. (SHAMIM ASHRAF / CHINA DAILY)

Total loans of the banking sector decreased 2.2 percent in the third quarter, while total deposits increased 2.1 percent in the period. The overall loan-to-deposit ratio decreased to 65.2 percent at end-September from 68 percent in the previous quarter.

However, the classified loan ratio of the banking sector increased to 1.61 percent at end-September from 1.5 percent in the preceding quarter.

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The banking sector continued to be liquid and well capitalized. The average liquidity coverage ratio of category 1 institutions was 174.5 percent in the third quarter, well above the statutory minimum requirement of 100 percent. The total capital ratio of locally incorporated authorized institutions stood at 20.9 percent at end-September, well above the international minimum requirement of 8 percent.