During history the banking system in Hong Kong has undergo huge changes. It has grown not only in the size, but also in its banking service. Currently in Hong Kong operates approximately 200 local financial institutions and over 70 representative offices of foreign banks .

The main peculiarity of the Hong Kong banking system is that all the banks are governmental and controlled by a state. Banking system in Hong Kong has a three-level scheme. The institutions which take the deposits are called authorized institutions. They are divided into the companies that accept deposits, restricted licenses banks and licensed banks.

The first type is the companies that take deposits. They may take deposits of $ 100 thousand HK dollars for a period of not less than three months. Banks with restricted licenses may only take deposits of $ 500 thousand Hong Kong dollars (HKD) and above. These banks are mainly interacting with the agencies that operate in the stock markets. The last type is licensed banks. They are entitled to perform banking transactions without limitation, to open and maintain checking and saving accounts of individuals and to take deposits of any size, collect funds and accounting documents, etc [8]. In a conclusion, the licensed banks are those which mainly form all the banking system in Hong Kong.

The most powerful license banks in Hong Kong are: Industrial and Commercial Bank of China (1398.HK), China Construction Bank (0939.HK) and Bank of China Limited (3988.HK). These banks have a long history and covered a long period of time till they have become the most powerful institutions. They overcome lots of difficulties and crises with the help of flexible reforming system and skillful headers. These banks have created a group of leaders that have confirmed their strong position in the banking system in Hong Kong during the history. Nevertheless, they still have various perceptive of progress to keep their level and steady development. Even though the banks have very similar policies, each of them has different strong and weak points.

The background of three banks

The appearance of each of these three banks has a very great influence on the banking system not only in Hong Kong, but worldwide. However, the level of development was not always as high as now. The banks have a long history of formation and a hard process of becoming driving forces in the banking system in Hong Kong.

The oldest bank is Bank of China Limited. It was founded in 1912 and long time has been the central bank in China. The bank deals with a great number of banking services and is well-known for its financial filial worldwide. The Banker magazine ranked it as the 18th among the world’s best 1,000 banks in 2005 year. What is more, this bank is the most internationalized commercial bank in the country. The first worldwide branch was established in London. Since then, China Limited has been opening the branches in the biggest world cities and financial centers. Now, the bank has more than 10000 home operations and near 600 abroad operations [6].

Another big commercial bank in China is China Construction Bank. It was founded in the 1 of October in 1954 in order to protest the implementation of the National Economic Plan that was singed for the first time for the five years. The bank started managing the big foundations for 152 building projects. The membership in People’s Republic leads to the fast development of the bank. It made a contribution in improving the government investments and promoting the rapid jump of China’s economy. In October 2005 the bank was listed in Stock Exchange of Hong Kong Limited. In the end of December 2010 CCB reached near US$220 billion, taking a second place among the listed banks in the world. Now it has 36 branches in Hong Kong and 3 centers that are Premier Select [3].

The youngest, but not the weakest one among these three is Industrial and Commercial Bank. It was established in 1964 year in Hong Kong under the name Union Bank of Hong Kong Limited. However in 21 of August 2000, it had changed its name and become a member of ICBC Group. The Bank also involves in provision of financial consulting and charge agency services. In the 2009 year ICBC has received in total 146 awards. Among them the most honorable were "Bank of the Year (Asia)", "Bank of the Year (China)", and "Most Respectable Enterprises in China" [9].

As a result, the banks have different background, but provide the similar services and are on the same position of growth.

The position of the three banks in the Banking system in Hong Kong

Nowadays the banking system in Hong Kong is developing very fast, not a minor part in its development is belonged to these three major banks. If to talk about the macro point of view, the banks have very strong positions.

First of all, the banks make Hong Kong one of the world’s leaders in banking system. The banks have lots of branches worldwide, which help them to confirm their position. Using such opportunities as services on-line and through phone, more and more customers can use the facilities, which are provided by the banks. For example, China Limited bank has more than 10000 home operations and near 600 abroad operations. Plus this, it has its own bank service on-line, where anyone can find the information or the service that is needed. The similar on-line address has Industrial and Commercial Bank of China. At the beginning of the year 2010 ICBC has 386,723 employees under the function payroll. It ensures a large number of financial products and services. It has near 3.61 million corporate clients and 216 million individual 16,232 of them across China, 162 overseas subsidiaries and a global network of more than 1,504 correspondent banks as well as Internet Banking, Telephone Banking and Self-service banking. What is more, the statistic says that by the end of the year 2010 the Bank had 16,227 offices in China [10]. China Construction Bank keeps pace with its online service on the address and many filial worldwide. It can boast to have near 57.05 million personal on-line accounts and near 8.16 million new accounts was recorded by the mobile phone banking [3]. A transaction amount that was earned from the mobile phone banking service reached the mark RMB 491.0 billion, which is 99% growth year-on-year [4].

Second of all it is their flexible service. "Convenience" of the Hong Kong banking jurisdiction is cased by the large-scale foreign trade orientation of the region. Foreign Exchange Market in Hong Kong in terms of turnover is the sixth largest in the world. Foreign exchange control in Hong Kong does not as such. Over 55% of banking operations within the region is in foreign currency. At the same time, Hong Kong banks offer a wide range of investment tools designed to preserve and increase capital such as: investment funds, savings deposits and other savings accounts.

At last, the profit of the banks makes a steady contribution to the Hong Kong economy. For example, Industrial Commercial Bank in the first half of 2011 reaped a net profit of RMB 109.575 million. In comparison with the previous year the same period of time it is 28.96% more. Moreover, the average return on equity reached the mark 25.12% that is 2.33 % points higher than that in 2010. The net interest margin returned back to 2.60% because of the improvement of the loan structure that is up 16 points over that it was previous year. During the first halt of the 2011 bank fixed that the fee and commission income have increased by 45.5%. As a result the ratio of the commission income and net fee reached 23.27%, it is 2.88% more than in the year 2010 at the same period [10]. The same steady profit we can view from the statistics of China Construction Bank. According to the latest reports, at June 30 total assets of the bank were RMB 11.754.766 billion it is 8.74% higher if to compare with the previous year. In addition to this, the total loans were RMB 6.140.387 billion, at the same time when total deposits were RMB 9,892.108 billion, that is 8.31% and 9.00% higher that in the year 2010 [5]. The proportion deposit-to-loan was kept at a reasonable level. The bank also has returned the average assets at 1.65% and average equality at 24.98% [4]. Not the worst position in the banking field this year has Bank of China Limited. At the end of the 2010 year the total assets reached RMB 10.46 trillion it is 19.51% more that at the beginning of the year. The owner’s equality kept the mark on RMB 676.150 million. What is more, taxes paid marked RMB 42.648 million. Not the last thing is also the creation of 13,400 new jobs that solved problems of lots of unemployed people.

As result, the mentioned three banks have indeed strong positions in the banking system in Hong Kong, because of their influence on the world banking system with the help of various branches worldwide, the convenient service and opportunities, that is always in the progress and that encourage people to be the customers of these banks and the steady development with constantly rising profit.

The development opportunities of Banking Industry in Hong Kong

The statistics say that in 2010 in terms of GDP China was ahead Japan, which ended up in third place. Standard Chartered Bank forecasts that by the end of 2020 China will be ahead U.S. in terms of GDP and will become the world’s leader [2]. Even though the China’s banks are leading in the world by the market value, and the first and second places in capitalization are occupied by the Industrial Commercial Bank of China and China Construction Bank, the banking industry, in order to keep pace, needs still to be in the process of development; moreover, it has lots of opportunities.

Firstly, in order to maintain the rate, it should be kept the reforms, that were accepted in the December 1993 year. Of course they were edited lots of times, but the Asian crisis, that took place in 1990th proved their quality. Mainly, it was canceled all the credit operations through the State Credit Plan. It gives more freedom to the commercial banks. As a result so called “lending windows” system was created [6]. The system allowed the banks to go off the frames when it was needed with the crediting system. The more flexible crediting system definitely opened new opportunities to the banks. The example can be the indexes of the profit rising today. The ICBC bank has increased its profit to 28.96% in comparing with the previous year. In addition, the statistics say that during the last 30 years the average index of the profit was only rising. The same position is with CCB, which index was 28.96% and BCL with 19.51%. It only proves that the banking strategy that was chosen by the banks can provide the gradual progress in the future.

Secondly, the good opportunity for the development would be the foreign investments. In the year 2003 the involvement of such a great banking institution as Citygroup, ING group, Bank of America, Asian Development Bank, Deutsche Bank and others allows to receive more than 19 milliards American dollars [2]. What it more, it was a huge step in the foreign banking system. That is why it will be very profitable to make other collaborations with the overseas banking system. It will create the possibility to open new branches and institutions abroad. However, the latest result announcement of the banks shows the rising income of the forging dividends and the growth of the customers worldwide at the last 30 years by 69% in general. That is why, the Hong Kong banks have strong opportunities to open new branches and involve new investors in the future.

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At last, Hong Kong banking service always is in the process of rebuilding. A lot of new technologies were created in order to make the service easy to use and more open to the customers. For example, ICBC spends lots of affords to use all the possibilities of technical progress. The numbers show that via E-banking, the new service that was provided, the business volume reached 62%.

Recently after the Ninth People’s Congress, where the press conference took place, Premier Zhu Rongji expressed the central governments optimistic of the position of Hong Kong as a regional financial centre as follows: “I think Hong Kong has not lost its strength as Asia’s financial centre. In future, as the world economy develops, I think there should be some adjustments to the role of Hong Kong. […] I firmly believe the strong points of Hong Kong have not been fully utilized. There is no limit to its future role” [1].

In order to compete well in the strong banking system of the world each bank should always be in the process of amplification. It is very important to manage to work well and stable all the time. Having leading technologies and skilful workers, good banking schemes and plans, known for lots of countries stable growth and steady position, the banking system in Hong Kong has many development opportunities.

The analysis of the weak and strong point of three banks


Industrial and Commercial Bank of China


China Construction Bank


Bank of China Ltd.


Latest Information

52 weeks, high




52 weeks, low




Stock Information

Market value




Total number of issued shares




Dividend Information









Accounting Information

Book value per share

RMB 4.46

RMB 2.46

RMB 2.33

Earnings per share

RMB 0.31

RMB 0.76

RMB 0.84


RMB 3.289.5 billion

RMB 6.140.387 billion

RMB 9.537.614 billion


RMB 6.196.2 billion

RMB  9.892.108 billion

RMB 12.234.192 billion

Cash and short term funds

RMB 64.987 billion

RMB 74.615 billion

RMB105.734 billion

Valuation Ratios

Price / Book value








Dividend payout ratio

21.22 fen

18.4 fen

20.7 fen

Income Statement Data

Net profit




Net interest income





Interest expense / income ratio

RMB 109.575 million

RMB 11.754.766 billion

RMB 10.46 trillion

Other ratios

Return on assets

1.53% %



Return on Equity








Loan/total assets








Deposit/total assets












Industrial and Commercial Bank of China, China Construction Bank and Bank of China Limited are the most powerful banking institutions in Hong Kong. They have constantly rising profit, proved customers and progressing growth. However, if to compare the banks reports for the last year, we can see that each bank has its own weak and strong sites.

If to compare the latest information of the three banks, the highest price the security reached during the last 52 weeks reached Industrial and Commercial Bank of China with the index 4.67, China Construction Bank reached the index 4.33 and the lowest 2.88 reached Bank of China Limited, that is almost twice lower from the first mentioned bank. However, if to look on the marks of 52-low, the ICBC had 6.90, CCB - 5.45 and BCL - 5.02, which means that CCB and BCL are almost on the same level. The most powerful bank according to the made up profit is BCL with RMB 10.46 trillion, the next one is CCB with RMB 11.754.766 billion and the last one is ICBC – RMB 109.575 million. If to analyze the dividend information given in the reports, the bank is on the same level: ICBC – 0.18, CCB – 0.16, BCL – 0.15. Nevertheless, the yields are ICBC – 4.40, CCB – 4.14, BCL – 4.95. Here we can see that the most yields have BCL – 4.95, than follows ICBC – 4.40, and the lowest number of yields has CCB – 4.12.

The great influence on the internal system of the bank has income statement data; to be precise it is the net profit and the net interest income. According to the net profit index CBL is the first one having 47.57%, than follows ICBC with the index 45.85% and the last one is CCB - 45.04%. The same position the banks have if to compare the net interest income index: CBL – 20.81%, ICBC – 20.59%and CCB – 20.44%.

Return on average total assets and return on average equity of BCL were 1.28% and 19.87%. They increased only by 0.10%. CCB annualized on average assets at 1.65% and annualized return on average equity at 24.98%. ICBC annualized average return on equity reached 25.12% that is 2.33% higher than in the 2010. The bank annualized return on assets reached 1.53%. Even though the BCL has the increasing only by 0.10% it is a good result if to compare with other three banks, which has only decreasing.

Reasonably using the credit policy tools, all the three banks actively uses the credit resources to promote the sustained development of credit. For example, ICBC registered fast growth in small enterprise loans, trade finance, and personal loans, up 25.2%, 21.2% and 10.9%, which are rather higher than the overall growth rate of credit. The same situation is with CCB: loans to small enterprises grew fast to RMB825.899 billion with the growth rate of 12.62%. This is 5.79 % higher than the growth rate for all corporate loans, however twice less than the CCB ratio. The loans to small enterprises grew also in BCL up 21.3%.

In summary, it can’t be mentioned one bank that is more powerful than others, each of them has their own pros and cons. For example, in terms of profit in the first place took BCL. What is more, it is the only bank where return on average total assets and return on average equity have increased. The dividend and yield ration, the net interest income index and the net interest profit are almost the same in all the three banks. However, the latest information 52-weeks high and low show that the lowest ratio has BCL.

My recommendations

In order to be the main force in the banking system in Hong Kong in the future, the three mentioned banks still need to rise up the level of investments. That is why the banks should have a good policy in order to which more investors will invest their money in the banks.

First of all, if to analyze the banks, it can be mentioned the sustainable grows and steady profit. As a prove can be the following statistic: In comparing with the previous year ICBC bank has increased its profit to 28.96%, CCB - 28.96% and BCL - 19.51%. What is more, the banks has been collaborating with the big financial institutions worldwide Citygroup, ING group, Bank of America, Asian Development Bank, Deutsche Bank and others since the year 2003. All these institutions can only prove the convenience conditions that are created by the banks.

Studies show that long-term securities yielding dividends are very beneficial. If to analyze the dynamic of S &P index from 1957 to 2003 of ICBC it was founded the top 100 bringing the annual dividend rate of 12.5%, and 100 companies with the lowest dividend - an average of 8%. What is more, yield S & P has been approximately 6.1% since 1995. Although with constant rotation or constant exchange of similar securities for six months starting in April, the profit is going to amount to 9.7%. A smaller company can show even better results - up to 12.5%.

What is more, it is much better to invest money in spring, when the ratios are higher as can be analyzed though the statistics given by the banks. This time all the additional services are available: bonuses, tax refunds and other forms of liquidity. In addition, a seasonal rotation of stock insures against possible losses.

Fourthly, the banks are going to have more investments in the foreign currency, which will be more convenient for foreign investors. The latest result announcement of the banks shows the rising income of the forging dividends and the growth of the customers worldwide at the last 30 years increased by 69% in general. Now the banks can boast to have over 55% of banking operations is in the foreign currency. However, it is more profitable to invest money in the national currency.

Fifthly, as the price increases to the debt capital the banks with a good balance sheet figures will be at lower risk. Many technology banks are reaching the level of self-financing, since their average earnings are high - in relation to the broader market, this ratio could reach 15.4% against 9.2%. Reaching the mark 57, 05 million on-line accounts and 8, 16 million accounts by the phone banking, CCB bank this year got 99% more income, than the previous year. If to compare the statistic analysis of the banks, we can make a conclusion that CCB bank is the leader in using new technologies. Even though, having near 35.95 million personal on-line accounts, BCL still can’t boast of receiving 99% more income from online service as CCB.

It should also attract the investors the internal statistics of the banks, the net profit index of CBL is 47.57%, than follows ICBC with the index 45.85% and CCB has 45.04%. The net interest income index is CBL – 20.81%, ICBC – 20.59%and CCB – 20.44%. This says only about the safety investments.

Finally, it would be reasonable to keep some assets in cash, according to the statistic this percentage ranges from 10 to 15%.

However, there is still some risk if to talk about funds. The situation is that ICBC is going to rise up their fund prices may become up and down. This can be a result of them becoming values. According to the ratios below, the same can happened with the CBL bank and CCB. That is why; the investors should involve this risk in signing the contract. They should look for independent legal, financial and other professional advice or help if they do not understand any of the information that contained the risks.

To sum up, in order to make good development strategies, bank should be aware of the profitability of banking products and dynamics in relation to profits; growth rates for banking products with the tracking of demand for them; possible regional or national market disruptions, the level of preparedness of the bank's strategic move to another area of activity; factors and conditions of competition with other banks at a competitive strategic areas of activity.


In conclusion, ICBC, CCB and CLB are the most powerful licensed banks in Hong Kong. Each of them has a long history. Even though the oldest one is BCL, all the three banks have the same strong position in the banking system in Hong Kong. Mainly it is because the variety of the branches worldwide, their flexible, open to everybody banking service and their frequent profit.

However, having the constant development, the banks and the Hong Kong banking system in general still have the perspectives to growth. Having accepted good reforms, having possibilities to open new branches worldwide and having an access to the new products that are invented by the good workers and technical progress, the bank industry of Hong Kong has perfect conditions to improve from year to year.

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