The global rating agency said the jurisdiction's banks face tough competition from new digital players but remain robust.

Hong Kong’s banks face stiffer competition from new digital entrants but their earnings should not be hit significantly and are well positioned for change, according to ratings agency Fitch.

HSBC recently scrapped or cut account fees, a move that its peers followed quickly (that bank has an AA-/Rating Watch Negative/aa- rating from Fitch).

“We believe this means most Hong Kong banks will follow suit and abolish minimum balance fees for the majority of their retail customers - a move that sits well with financial inclusion initiatives promoted by the Hong Kong Monetary Authority in the last few years,” the agency said in a report on the jurisdiction.

Prominent Hong Kong banks include HSBC; Bank of China (Hong Kong); Hang Seng Bank; Standard Chartered; Bank of East Asia; Industrial and Commercial Bank of China; DBS Bank (Hong Kong); Wing Hang Bank; Nanyang Commercial Bank; and CITIC Bank International.

The Hong Kong Monetary Authority has handed out licences to eight virtual banks to operate branchless banking businesses, primarily retail, from a total of around 30 initial applicants for the licences.

“The fee move, on a standalone basis, is unlikely to have a meaningful revenue impact on the banks as account fees are almost negligible to most Hong Kong banks and mostly serve as a disincentive for customers to keep very low balances,” Fitch said. “Key fee income sources are well diversified, and are mainly from credit cards, securities brokerage, loans commission and insurance, which are volume-driven. Hong Kong banks have been investing in digital banking capabilities, by developing in-house platforms or partnering with technology experts, with the aim of enhancing customer experience by offering a wide range of products in a more convenient way.”

“The granting of virtual bank licences would introduce more competition, but it is unlikely to be a significant game-changer for the local incumbents that have been operating in this competitive landscape for many years. That said, many Hong Kong banks have advanced on their digital and mobile banking capabilities to compete against virtual banks, which means the mobility of retail deposits, especially among existing banks, could have a larger impact on banks' funding costs in the future,” it said.