HONG KONG SAR – Media OutReach Newswire – 24 January 2025 – Hong Kong’s banking sector confirmed indicators of restoration in 2024 after a protracted interval of challenges. This optimistic pattern is predicted to proceed in 2025, with the tempo of US charge cuts anticipated to be slower than many forecasts.
KPMG’s newest report, the Hong Kong Banking Outlook 2025, predicts substantial alternatives for banks which can be keen to adapt and innovate, with applied sciences like Generative AI and digital belongings set to rework working fashions. The report supplies insights and predictions from KPMG consultants relating to the outlook for Hong Kong and highlights key themes for banks to concentrate on this yr, together with embracing rising applied sciences, staying abreast of ESG tendencies and protecting tempo with regulatory developments.
Paul McSheaffrey, Senior Banking Accomplice, Hong Kong, KPMG China, says: “2024 marked an enchancment for Hong Kong’s banking sector, with indicators of restoration rising after a protracted interval of challenges. Pushed by coverage shifts within the Chinese language Mainland, these developments have laid the groundwork for cautious optimism coming into 2025. Some inexperienced shoots of restoration have been seen, together with an uptick in funds raised on the Hong Kong Inventory Change and optimistic coverage measures within the Chinese language Mainland aimed toward stimulating shopper demand. Thus, we’re extra optimistic in regards to the prospects of the Hong Kong banking sector through the yr.”
For retail and industrial banks, KPMG believes that the tempo of rate of interest reductions can be slower than many forecasts counsel, which can assist banks protect their margins. For funding banks, the optimistic coverage measures in China are anticipated to boost shopper sentiment, thereby fostering capital elevating and M&A exercise in China, in the end benefiting Hong Kong.
Jianing Tune, Head of Banking and Capital Markets, Hong Kong, KPMG China, says: “As we enter 2025, the atmosphere confronted by banks is turning into more and more complicated. Nevertheless, we consider that this yr will convey substantial alternatives for banks keen to adapt and innovate. Rising applied sciences, corresponding to Generative AI and digital belongings, have the potential to rework working fashions. By way of value optimization, information governance, and digital transformation, banks can navigate their present challenges and construct a basis for long-term progress.”
Resilience stays a key regulatory focus
Resilience towards cyber fraud and monetary crime will stay a high precedence in 2025 as losses skilled by banks and clients proceed to make headlines. Assembly regulatory expectations can be essential, with a robust concentrate on implementing current rules and new resilience necessities. AI adoption can be change into a sector-wide matter in monetary crime over the subsequent two years, as authorised establishments and regulators gear as much as deal with dangers and meet regulatory expectations.
KPMG additionally expects Hong Kong regulators to launch initiatives to additional encourage using distributed ledger know-how (DLT) within the banking trade. That is pushed by the necessity to construct resilience towards the operational dangers related to conventional settlement and cost infrastructure. It additionally addresses the necessity for banks to adapt their enterprise fashions within the face of competitors from new Fintech market entrants and ‘digital natives’.
Strategic value optimisation
Geopolitical uncertainty, rising operational bills and growing regulatory necessities imply that manging prices will stay a spotlight within the banking sector. As an alternative of implementing broad cost-cutting measures, KPMG expects banks to undertake a extra strategic method centered on value optimization. This includes figuring out the basis causes of inefficiency and implementing focused corrective interventions. Automation may be an efficient device on this course of, addressing latent inefficiency in core processes throughout entrance, center, and again workplace. This will result in elevated productiveness, decreased value to serve, an enhanced buyer expertise and in the end, a stronger high line.
Digital transformation tendencies
The tempo of digital transformation in Hong Kong’s banking sector is predicted to speed up in 2025. Multiple-third of monetary establishments are already integrating Generative AI, supported by authorities initiatives such because the HKMA’s Generative AI Sandbox. Digital belongings have additionally been rating excessive on the digital transformation agenda for banks, with initiatives like HKEX’s Digital Asset Index Collection and HKMA’s Challenge Ensemble Sandbox accelerating Hong Kong’s tokenisation market growth. KPMG expects coverage assist to proceed on this space all through 2025.
In 2025, Hong Kong banks ought to prioritise digitising their operations by leveraging sources corresponding to Fintech Join; increasing their digital-savvy workforce via expertise acquisition and upskilling; and future-proofing their digital asset and Generative AI readiness by establishing a strong information governance framework.
