ar2013

Economic and Financial Environment
Retail banks’ net interest margin (NIM) widened to a yearly
average of 1.40% in 2013 from 1.36% in 2012 as a result of
lower funding costs compared with a year ago (Chart 9).
Driven by the growth in income from foreign exchange
and derivatives operations, as well as income from fees
and commissions, retail banks’ non-interest income as a
share of total operating income rose slightly to 46.7% from
46.3% in 2012.
The operating costs for retail banks increased by 5.2%,
partly caused by rising rental and staff expenses.
Nevertheless, the cost-to-income ratio decreased to 42.2%
in 2013 from 45.8% in 2012 as the growth in operating
income outpaced that of operating costs during the period
(Chart 10).
The net charge for debt provisions rose to $3.6 billion in
2013 from $3.5 billion a year ago. Despite the increase, the
provisions remained at a relatively low level, reflecting the
sound quality of retail banks’ loan book.
Chart 9
Retail banks’ net interest margin
Chart 10
Retail banks’ cost-to-income ratio
2.0
%
52
%
1.9
50
1.8
1.7
48
1.6
46
1.5
44
1.4
1.3
42
1.2
2008 2009 2010 2011 2012 2013
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2008 2009 2010 2011 2012 2013
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ANNUAL REPORT 2013 • HONG KONG MONETARY AUTHORITY