Investment summary

HK banks’ recent quarterly results highlighted some encouraging signs of improving revenue outlook with loan growth and fee income came in better than expected. Having said that, net interest margin (NIM) contracted further in 1Q21. 1-month HIBOR weakened further into 2Q21 and dropped 4bps vs. the average of 14bps in 1Q21, suggesting there could be some more downward pressure on NIM. Banks’ management, in general, is guiding NIM would under some pressure but should stabilize thereafter, with headwinds from rates to be offset by funding repricing and increased loan growth.