HSBC Cuts Lending Rate – First Time In 11 Years

HSBC cut its prime lending rate in Hong Kong for the first time in 11 years, as an adviser warned of a ‘challenging’ business environment under the double whammy of the ongoing anti-government protests and the US-China trade war.

The banking giant slashed its best lending rate by 12.5 basis points to 5 percent, shortly after the Monetary Authority cut interest rates by 25 basis points to 2 percent – in line with a rates cut by the US Federal Reserve overnight.

“We hope the lending rate cut will take a little pressure off [businesses] and stimulate domestic consumption”, HSBC’s Asia Pacific Adviser George Leung said.

He added that there is likely to be more pressure on the US Fed to cut rates again, and for interbank lending rates in Hong Kong and London to possibly drop further.

“This is likely to make the operating environment for banks like HSBC more challenging in the future, but we hope that it would bring some relief to our customers and maybe a little bit of sunshine to the gloomy economic outlook”, he said.

At the same time, the bank is reducing its savings rate for both Hong Kong- and US-dollar deposits to 0.001 percent.

“On the savings side, our room for manoeuvre is limited. We are very close to zero boundary at the moment – the point at which we cannot reduce further”, Leung noted.

Hours before new government figures confirmed that Hong Kong's economy has slid into a technical recession, Leung told reporters that the bank expects to see a 0.5 percent contraction in GDP for the year.

He said the almost five months of anti-government protests is likely to have shaved 1 percent off the growth rate from its effect on the retail, transport and catering industries alone.

But Leung thinks the key to recovery is a swift resolution to the US-China trade war.

“In the future, whether Hong Kong will have a stronger growth rate, I think the key factor still lie on the trade prospects … this is the major pillar of Hong Kong’s economic structure, so hopefully we [get] some good news from the US and China”, he said.

Standard Chartered Bank also cut its best lending rate by the same margin – 12.5 basis points – to 5.25 percent.

Its savings rate was cut from 0.125 to 0.001 percent.

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