Thursday, 06 May 2021

Bank of China (Hong Kong)’s strong capital position and robust asset quality keep it ahead of peers in Asia Pacific

By The Asian Banker

  • Bank of China (Hong Kong) tops the Strongest Banks by Balance Sheet in Hong Kong and Asia Pacific ranking
  • The bank delivered an outstanding performance in most metrics of the balance sheet
  • The bank is taking digitalisation and ESG to Greater Bay Area and Regional Comprehensive Economic Partnership 

26 February 2021, Singapore Bank of China (Hong Kong) or BOCHK topped the ranking of Strongest Banks by Balance Sheet in Hong Kong and Asia Pacific (APAC) in 2020. BOCHK and other banks were recognised at the Strongest Banks by Balance Sheet Briefing and Recognition Virtual Ceremony 2020 presented by The Asian Banker. 

This is the most comprehensive annual evaluation that captures the quality and sustainability of the balance sheets of banks in APAC, Middle East, and Africa regions.

The ranking is based on a detailed and transparent scorecard that evaluates commercial banks and financial holding companies (banks) in six areas of balance sheet financial performance, namely the ability to scale, balance sheet growth, risk profile, profitability, asset quality, and liquidity. For Strongest Banks by Balance Sheet 2020, the financial information in the first half of 2020 (1H 2020) was collated and incorporated into the assessment of how banks performed during the COVID-19 pandemic.

BOCHK tops ranking of strongest banks by balance sheet in Asia Pacific

The bank continued to deliver outstanding performance in most metrics of the balance sheet. It demonstrated robust asset quality with a low gross non-performing loan (NPL) ratio of 0.25% and a high loan loss reserves (LLR) to gross non-performing loans ratio of above 200%. In addition, it remained well-capitalised with a high capital adequacy ratio (CAR) of 23.1% while its liquid assets to total deposits and borrowings ratio stood at 50%. All of these enable the bank to take its leading position among all banks in APAC. 

Luo Nan, board and company secretary of BOCHK, in his acceptance speech said, “Deeply-rooted in Hong Kong for over a century, BOCHK has always endeavoured to provide quality financial services to the public and local communities while maintaining a sound operation. In the face of various challenges in 2020, we remained steadfast in navigating this peculiar time with our customers and stakeholders. We achieved high-quality growth and sustainable development through technology innovation and digital transformation. Going forward, BOCHK will continue to pursue its strategic goal as an internationalised regional bank with the solid financial performance”.

The following were especially considered in the evaluation of the banks’ balance sheet strength and resilience: how accelerated digitalisation are enhancing bank balance sheet strength, the impact of debt moratoria, rescheduling and financial aid measures introduced by regulators on bank asset quality, how banks are growing alternative sources of income amid the record low interest rate, and the strategic economic relief and regulatory support in response to the crisis and effect on the pace and scale of recovery.

The bank delivered an outstanding performance in most metrics of the balance sheet

With the strength score of 4.29, BOCHK ranked first out of 500 in the Strongest Banks by Balance Sheet in APAC. The bank achieved a high strength score in scale, risk profile, asset quality, and liquidity. The top 20 strongest banks in the region include eight Hong Kong banks, four Chinese banks, three Japanese banks, two Malaysian banks and one each from Australia, Singapore, and South Korea. BOCHK, along with HSBC, Standard Chartered Bank (Hong Kong), and Hang Seng Bank secured the first four places.

Overall, Hong Kong banks have once again achieved the highest strength score in the evaluation. The weighted average strength score stood at 3.97 out of 5, followed by Singapore banks (3.67), Chinese banks (3.40), and Australian banks (3.36). Hong Kong banks have remained well-capitalised and highly liquid. In 1H 2020, the weighted average CAR was 20.6% and liquid assets to total deposits and borrowings ratio stood at 49%. The asset quality was also strong with an average gross NPL ratio of 0.66% and average loan loss reserves to gross non-performing loans ratio of 133% at the end of 1H 2020.

BOCHK demonstrated stronger asset quality than HSBC and Standard Chartered Bank (Hong Kong), although these two banks achieved higher scores in non-interest income to total operating income ratio. HSBC and Standard Chartered Bank (Hong Kong) recorded higher gross NPL ratio at 0.7% and 0.6%, respectively and lower LLR to gross non-performing loans ratio at 103% and 89%, respectively. Meanwhile, BOCHK enjoyed a higher ROA and lower cost to income ratio than Standard Chartered Bank (Hong Kong). When compared to Hang Seng Bank, BOCHK maintained a stronger liquidity position. The liquid assets to total deposits and borrowings ratio of Hang Seng Bank stood at 39%, lower than BOCHK’s 51%.

The bank is taking digitalisation and ESG to Greater Bay Area and Regional Comprehensive Economic Partnership 

Luo said, “There are greater opportunities such as the Greater Bay Area, Wealth Management Connect with the mainland China, the Regional Comprehensive Economic Partnership (RCEP) and the new round of the Renminbi (RMB) internationalisation. BOCHK grasps the strategic opportunities related to the Greater Bay Area, RMB and RCEP to expand our business and create value to all our stakeholders”.

“There are two major trends for our business nowadays - digitalisation and environmental, social, and governance (ESG). Both are customer-centric. Digitalisation is to better serve the customer needs and ESG is to create more value for customers at large. In this process, banks are facing unprecedented competition within and outside the industry,” Luo explained.

“To survive and achieve sustainable growth, we must embrace the change by introducing more fintech, establish financial service scenarios, build open banking platforms, and cooperate with business partners to build new ecosystems. Meanwhile, everything should meet the ESG requirements to ensure the long-term optimal value for customers and other stakeholders of the banks,” he added.

For the evaluation criteria and full ranking list of Strongest Banks click here

About the programme

The Asian Banker Strongest Banks by Balance Sheet is an annual assessment of the financial and business performance of the banking industry in the Asia Pacific, Middle East, and Africa regions. The assessment ranks the top performing banks in each country by strength, an evaluation that is based on a belief that a strong bank demonstrates long-term profitability from its core businesses.

The scope and coverage for The Asian Banker Strongest Banks by Balance Sheet come from both the mature markets and the most promising emerging markets in the regions. The focus of the assessment is on commercial banks and financial holding companies with a significant proportion of activity in commercial banking. The assessment does not include central banks, policy banks or finance companies.

The winners are determined using a scorecard approach based on six crucial performance indicators rated on a scale of 0-5: scale, balance sheet growth, risk profile, profitability, asset quality, and liquidity.

About The Asian Banker 

The Asian Banker is the region’s most authoritative provider of strategic business intelligence to the financial services community. The Singapore-based company has offices in Singapore, Malaysia, Manila, Hong Kong, Beijing, and Dubai, as well as representatives in London, New York, and San Francisco. It has a business model that revolves around three core business lines: publications, research services and forums. The company’s website is www.theasianbanker.com

 

For further information, you may get in touch with:

Ms. Sue Kim

Marketing Manager

skim@theasianbanker.com

www.theasianbanker.com

 

 



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