Hong Kong banking posts strong results amid structural shifts

Hong Kong banks delivered solid headline performance in 2025, with the total assets of all licensed banks increasing by 7.1% to HKD 26 trillion ($3.3 trillion) and operating profit before impairment charges rising by 5.5% to HKD 337 billion ($42.9 billion). While lower interest rates compressed net interest margins as rate cuts took effect, the sector continued to demonstrate balance sheet resilience.

Looking forward, challenges including an uncertain interest rate environment, persistent softness in commercial real estate and intense competition for deposits may weigh on profitability. Maintaining strong asset quality and prudent risk management will remain essential to preserving earnings and balance sheet resilience. The newly launched KPMG's Hong Kong Banking Report 2026 explores the trends, opportunities and risks shaping the next phase of the sector's development.

While maintaining resilience remains a key priority, the report suggests that the next phase of growth for Hong Kong banks will increasingly be driven by their ability to adapt to structural shifts currently underway.

The report highlights significant opportunities in Hong Kong's fixed income and currency (FIC) markets, with the Securities and Futures Commission–Hong Kong Monetary Authority (SFC-HKMA) Roadmap providing a strong foundation for the next stage of market development. Hong Kong already accounts for nearly 30% of Asian international bond issuances, has topped the regional league table for nine of the past 10 years, and is the world's fourth-largest foreign exchange market by daily turnover. As Hong Kong deepens its FIC foundations, maintaining strong standards of conduct, transparency, and accountability will be essential to reinforcing the city's position as a trusted international financial centre.

Jia Ning Song, head of banking and capital markets, Hong Kong SAR, KPMG China, said: "A fully integrated gold value chain is a natural and significant extension of Hong Kong's fixed income and currency markets, and the opportunity for banks is substantial, spanning financing, custody, clearing and the development of new products for international and Chinese Mainland clients alike. History shows that what distinguishes a trading hub of lasting importance from one that simply attracts flows is the quality of its foundations. Trust, benchmark integrity and clear standards of accountability are what allow a market to deepen over time and withstand periods of stress. By embedding these standards now, Hong Kong can ensure this next phase of growth strengthens, rather than tests, its standing as a trusted international financial centre."

Transition finance was identified as another major opportunity. Hong Kong is well positioned to become a leading centre for transition finance as the Chinese Mainland channels increasing capital into technology and industrial decarbonisation. Banks that can demonstrate credible methodologies, robust assessments of transition plans, and clear transition frameworks will be best placed to connect these financing needs with international capital and capture emerging growth opportunities.

Paul McSheaffrey, senior banking partner, Hong Kong SAR, KPMG China, said: "The outlook for Hong Kong's banking sector is increasingly being shaped by structural changes. As Hong Kong continues to strengthen its role as an international financial centre and a bridge between global capital and the Chinese Mainland, opportunities are emerging across capital markets, transition finance, and technology-enabled banking. At a time when traditional revenue drivers such as net interest margins remain under pressure, banks that successfully capture these opportunities while maintaining strong governance, trust, and resilience will be best positioned to drive sustainable growth."

The report also underscores the importance of maintaining trust and resilience as the banking sector evolves. As new technologies and financing models reshape the industry, banks will need to balance innovation with strong governance and risk management.

The adoption of artificial intelligence (AI) is entering a new phase. As banks move beyond isolated AI pilots, the harder challenge is no longer the technology but the governance, model risk management and accountability needed to scale safely across the enterprise.

Angel Mok, partner, Financial Services Technology Consulting, Hong Kong SAR, KPMG China, said: "Generating sustainable value from AI requires more than technology investment alone. Banks that combine innovation with strong governance, accountability, and workforce readiness will be best positioned to scale AI across the enterprise with regulatory credibility and confidence."

As AI accelerates the pace and sophistication of cyber threats, banks are under increasing pressure to strengthen their cyber resilience capabilities. While strong security controls remain essential, regulators are placing greater emphasis on intelligence-led risk management and the embedding of governance and accountability across all lines of defence. Expectations are also expanding beyond prevention, with banks increasingly required to demonstrate their ability to respond to, contain and recover from cyber incidents while maintaining critical operations.

Re-disseminated by Wealth and Society