DBS Group Holdings Ltd., Southeast Asia’s largest bank, plans to expand its Hong Kong loan book by about 10 percent this year as trade with mainland China drives demand for renminbi-currency services.
DBS’s 2012 yuan trade settlement surged 60 percent from a year earlier, said Sebastian Paredes, the Singapore-based bank’s chief executive officer for the Chinese city. He predicts business using the renminbi, as China’s currency is known, will grow beyond the 17 percent of total revenue that it reached last year.
Lenders in Hong Kong handled about 90 percent of China’s yuan-denominated trade payments last year, while sales of so-called Dim Sum bonds climbed to 174 billion yuan ($28 billion), a 15 percent jump from a year earlier, data compiled by Bloomberg show. Premier Wen Jiabao last week pledged to expand global use of the currency as the nation seeks to cut reliance on the dollar.
“What we clearly want is to continue the RMB products, the RMB services and the RMB capabilities to be in the forefront of the banking sector,” Paredes said in an interview March 8. “You would expect a continuation of rapid growth in the utilization of the RMB not only in trade, but in FX, in money markets, in debt.”
Hang Seng Bank Ltd., the second-largest Hong Kong-based lender by assets, said last week that loan growth may be stable this year as the city imposes mortgage restrictions to cool housing prices. The unit of HSBC Holdings Plc posted an 11 percent increase in lending last year.
DBS rose 1.1 percent to S$15.62 at 10:18 a.m. in Singapore, the highest level since September 2008, bringing its gain for the year to 5.3 percent.
The Qianhai district of Shenzhen, a city that borders Hong Kong, was picked as the testing ground for cross-border yuan loans, in which 15 banks based in Hong Kong provided about 2 billion yuan to companies in January.
While DBS wasn’t among the first batch of lenders, cross-border lending in Qianhai is “one of our key priorities,” said Paredes. “We are discussing with several customers the opportunities to finance.”
The bank is also keen to participate in the Renminbi Qualified Foreign Institutional Investor program, Paredes said. The so-called RQFII allows yuan raised offshore to be invested in China’s domestic capital markets. China last week expanded it to include institutions registered in Hong Kong.
Net income at the Hong Kong unit of DBS, the largest profit contributor outside Singapore, grew 25 percent last year to S$716 million ($574 million), while net interest income, the difference between what it makes from lending and what it pays on deposits, rose 12 percent.
DBS will add staff at its corporate banking unit, along with debt capital markets employees as companies turn to bonds and other debt obligations from loans, Paredes said. This year’s increase will be less than 5 percent, he said.
After increasing its staff by 16 percent in 2009-2012, DBS has more than 4,000 employees in Hong Kong.