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BANK of East Asia Ltd, Hong Kong's third-biggest by assets, and smaller competitors are offering depositors interest rates as much as 17 times higher than HSBC Holdings Plc as the credit crisis drives funding costs higher.
BEA, Wing Hang Bank Ltd and Dah Sing Banking Group Ltd are offering rates as high as 4.3375 percent for one-month time deposits, according to their Websites. That compares with 0.25 percent at HSBC, Hong Kong's largest bank by deposits.
Money market rates are rising as the deepening global financial crisis makes banks reluctant to lend to each other, increasing the importance of deposits as a source of funding. Rumors questioning BEA's stability last month led to Hong Kong's first bank run in more than a decade.
Higher rates
"The banks can increase their net interest margin" by drawing more deposits, said Kenny Tang, director of Tung Tai Securities Co in Hong Kong, referring to lending profitability. The higher savings rates are likely to attract investors seeking safe-haven options amid the stock market declines, he said. BEA dropped 3.4 percent to close at HK$20.15 (US$2.6) on Friday, paring earlier losses. Wing Hang fell 0.5 percent to HK$43.70 while the local benchmark Hang Seng Index declined 8 percent. Stocks across Asia tumbled Friday, driving a regional benchmark toward the biggest weekly drop since it was created almost 21 years ago, Bloomberg News said.
The Hong Kong Monetary Authority on Thursday cut its base rate by 150 basis points to 2 percent. That didn't stop the benchmark three-month Hibor from rising one basis point to 4.41 percent on Friday, almost double from September 10. One-month Hibor was 4.99 percent. One basis point is 0.01 percentage points.
Ratio rises
The interbank rate is the rate at which banks bid for and offer deposits to each other.
Tong Hon Shing, general manager and head of the personal banking division at BEA, wasn't immediately available to comment.
The average loan-to-deposit ratio at Hong Kong banks rose to 83.2 percent in August, the highest since December 2005, according to HKMA data.
BEA is offering 4.3375 percent for HK$400,000 placed in one-month time deposits, according to its Website. On September 1, the interest was 1.0675 percent, bank spokeswoman Vera Lung said.
Wing Hang Bank customers get 3.55 percent for one-month time deposit of up to HK$500,000, according to its Website. HSBC pays 0.25 percent for one-month deposits of less than HK$500,000, its Website shows.
Fitch Ratings on September 29 cut BEA's long-term credit rating outlook to negative from stable after the bank run.
Hong Kong Financial Secretary John Tsang said the rumors were unfounded and malicious and the bank has enough capital. | |
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