Hong Kong banks' profits predicted to edge up by over 7% in 2014

Find out reasons why.

According to Barclays, the HKD L/D ratio rebounded slightly to 78.2% in Dec 2013. There was slight migration towards HKD time deposits.

As such, HKD funding costs rose to 0.39% in Dec 2013 and the net interest margin (NIM) of Hong Kong retail banks narrowed slightly to 1.37% in 4Q13 (1.41% in 3Q13).

Here's more from Barclays:

We expect banks to ride on the steepening USD yield curve to enhance loan and bond yield. We forecast stable NIMs for Hong Kong-listed banks in 2014. We expect core net profit of most Hong Kong-listed banks will grow more than 7% YoY in 2014.

We keep our NEUTRAL rating for Hong Kong banks with a slight bias towards the positive impact of QE tapering and rising profit contribution from offshore RMB business.