Consultant's review finds room for improvement in reporting credit risk and concentration

Hong Kong banks score highly for quality of disclosure to shareholders, but there is room for improvement, according to consultant Deloitte Touche Tohmatsu.

Areas of particular concern included reporting on credit risk, especially credit concentration, more detailed breakdowns of bank advances, and clearer definitions for 'fair value' in accounting for investments, said Maria Xuereb, partner in charge of the consultant's banking industry group.

Ms Xuereb was speaking at a press conference called to present the second annual review of Hong Kong financial institutions produced by Deloitte, which aims to rival a wider-ranging annual review produced since the mid-1980s by KPMG.

The Deloitte review was based on a survey of 25 licensed banks, whereas the KPMG survey covers all 31 licensed banks in Hong Kong, together with restricted-licence banks, deposit-taking companies and foreign bank branches.

Best performing banks in terms of returns on equity and assets for last year were Hang Seng (19.5 per cent) and Bank of America (2.4 per cent), with Union Bank (minus 22.5 per cent and minus 2.7 per cent, respectively) the worst performer in both categories, according to the Deloitte review.

By comparison, the KPMG survey published earlier this year ranked HSBC Investment Bank Asia (43.9 per cent) the top licensed bank in terms of return on equity last year, and Wayfoong Finance (3.18 per cent), the top-ranked licensed bank by return on assets.