1st October 2024 – (Hong Kong) As Hong Kong’s eight virtual banks advance into their fourth year of operation, the collective journey towards profitability remains arduous yet shows signs of potential stabilization. During the first half of 2024, these fintech ventures reported a cumulative loss of HK$1.29 billion, a 9.59% improvement over the previous year, largely hampered by significant credit impairment costs.
Among these, Mox Bank, spearheaded by Standard Chartered (02888), recorded the steepest annual rise in credit impairments at 72.79%, totalling HK$257 million. This surge in impairments led to an expanded semi-annual loss of HK$438 million, a 38.08% increase from last year. Despite these figures, Mox Bank’s CEO, Hubertus von Grünberg, expressed optimism, citing a revision in their credit approval model that leverages more data, leading to a monthly decrease in credit impairments. “We believe the worst is behind us,” von Grünberg stated, confident of achieving breakeven soon.
For the first half of the year, Mox reported a net interest income of HK$247 million, up 39.63% year-on-year. The bank’s customer base surged over 40% to 620,000, while customer deposits jumped approximately 50% to HK$14.546 billion, with current account savings accounts (CASA) making up 70% of the total deposits. Additionally, the cost per customer has decreased by 20% compared to last year. However, von Grünberg cautioned that the impending rate cut cycle might negatively impact net interest income, though strategies to increase loan volumes and expand fee-based income are expected to mitigate this effect.
On the other hand, ZA Bank, a subsidiary of ZhongAn Online (06060) and touted as the first virtual bank in Hong Kong to achieve monthly profitability, saw its losses narrow by 45.35% to HK$109 million in the first half of the year. This was the smallest loss among the competitors. Both net interest and service fee income for ZA Bank increased by 84.39% and 37.66% respectively. “This single month of profitability is a testament to the viability and sustainability of our business model,” said CEO Yao Wensong. ZA Bank has also received regulatory approval to add virtual asset transactions to its offerings, with sandbox testing preparations underway.
WeLab Bank, following a significant restructuring and owning the online lending platform WeLend, saw its net interest and service fee income soar by more than double, marking the highest growth among the virtual banks. Despite this, WeLab’s half-year losses were reduced by 22.57% to HK$125 million. The restructuring has notably boosted WeLab’s loan book by 162% to HK$5.088 billion, although still trailing behind Mox and ZA in total customer loans.
Livi Bank, backed by Bank of China Hong Kong (02388), also showed significant improvement with a 59.57% reduction in losses to HK$124 million. In contrast, Ant Bank (Hong Kong), which saw a substantial 289% increase in deposits to HK$2.468 billion, expanded its losses by 90.94% to HK$118 million.
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