To mark its 150th anniversary in the territory, Standard Chartered rolled out a campaign titled ‘Cheer up, Hong Kong’ earlier this year. Standard Chartered - third among Hong Kong’s four biggest banks - certainly had plenty to cheer, reporting an unexpected 13 per cent increase in global profit in 2008. Yet, that same day - and more in keeping with the times - rival HSBC, Hong Kong’s largest bank, announced a 70 per cent drop in global profit due to debt write-offs and saw its stock fall to 12-year lows on the Hang Seng Index (HSI).
For Hong Kong’s financial institutions, 2009 is so far proving to be a re-run of 2008, a year that brought a 48.3 per cent drop in the HSI, an occasional bank run and legal claims against the defunct Lehman Brothers for its ‘mini-bonds’.
But habits persist in Hong Kong - even if such behaviour is recently acquired - and it is business as usual for banks and their customers. “We don’t see substantial changes in consumer banking behaviour as we would have expected,” says Ivy Cheung, research director at Synovate. “The major difference is that since the Lehman incident people are less likely to buy structured products or long-term investments such as mutual funds. Instead, they are looking for liquidity such as forex trading.”
How have banks adapted? “So far I haven’t seen much change,” says Shyam Joseph, sector head, finance and business services at TNS. “My judgment is that financial institutions feel it is better to lie low. First, they don’t know the whole picture themselves. Second, they may feel that being seen or heard may not be a good thing - no matter what they say.”
When it comes to advertising, Hong Kong’s banks do not tend to lie low. HSBC, Standard Chartered, Hang Seng Bank (a HSBC acquisition) and Bank of China spent HK$1.6 billion, or nearly one quarter of the $6.7 billion of financial advertising in the territory last year. Considering that the category commands 12 per cent of the territory’s total adspend, this media blitz gives them strong cut-through.
This ‘big four’ dwarfs all competition. Total spontaneous awareness for HSBC was 96 per cent, for Hang Seng 82 per cent, for Bank of China 75 per cent and for Standard Chartered 57 per cent, according to a Nielsen survey. Few other banks reached the single digits.
Hong Kong has one of the world’s most consolidated banking industries. In the 1990s, the top five banks averaged slightly more than half of all deposits, but consolidation accelerated as the economy weakened during the Sars epidemic. In 2004, HSBC emerged with nearly half of all deposits, and Hang Seng, Bank of China and Standard Chartered also made gains against the smaller banks.
These banks serve as all-purpose financial portals for some of the world’s most gung ho retail investors. Of Hong Kong’s adult population, 35.7 per cent trade in stocks, according to the Retail Investor Survey 2007 by Hong Kong Exchanges and Clearing - double the 16 per cent that traded in 1997. Banks are the primary trading channel - especially for young and novice punters - with 63 per cent of retail investors buying stocks solely with banks.
Hong Kongers use an average of 2.55 banks and hold 8.65 financial products, says Justin Garrett, head of financial research at The Nielsen Company Hong Kong.
Nielsen figures show that Hong Kongers are less reliant on debt than consumers elsewhere, with only six per cent relying on personal lending, and 12 per cent having a current mortgage. While 66 per cent have a credit card, only eight per cent of these cardholders carry debt from month to month - a much lower level than the debt carryover rates seen in the West.
What they look for, says Garrett, is a way to get a return. TNS’ Joseph agrees. “For service, they are ‘efficiency seeking’ - they want speed and accuracy. They don’t care much for friendly greetings or chitchat. As in other markets, investors went into products without fully understanding the risks. In the short term, this has changed. But once things get back to the good old days, it will happen again.”
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