Hong Kong and Singapore lenders are expected to improve their operating efficiency in the coming months amid higher net interest margins, according to an insight report by S&P Global Market Intelligence.
The high net interest margins are forecast to provide a buffer against potential increases in operating costs.
According to the report, for the 12 months through June 30, 2023, Hong Kong banks saw their aggregate cost-to-income ratio, a key measure of operating efficiency, improve to 45.60% from 48.63% in full-year 2022. Meanwhile, Singapore lenders recorded an improvement to 40.53% from 42.56% over the same period.
The improvements are attributed to the increase in US interest rates since March 2022, which made way for income growth. Hong Kong's interest rates and currency are dependent to the US, while Singapore was among the first in Asia to tighten its monetary policy after the COVID-19 pandemic to counter high inflation, the report said.
