Hong Kong-based banks face an acute talent shortage in 2022 as the city relentlessly pursues a zero-COVID-19 policy with some of the strictest travel restrictions in the world currently.
Management teams of banks in Hong Kong have noted a contraction in the talent pool from the second half of 2021, accounting firm KPMG said a Jan. 25 report. The talent shortage is proving to be more severe than in prior years as banks look to fill roles in relationship management, technology, and environmental, social and governance.
"This is likely to remain a challenge that banks will need to address in 2022 and could limit the extent to which banks are able to realize their ambitions," said Paul McSheaffrey, partner, financial services at KPMG China. "The attraction and retention of talent will therefore be a major priority for banks."
Two years into the COVID-19 pandemic, Hong Kong still subjects most inbound travelers to 21-day quarantines in hotels, even if they are fully vaccinated. In November 2021, several American banks in Hong Kong, such as Morgan Stanley, JPMorgan Chase & Co., and The Goldman Sachs Group Inc., announced quarantine incentives up to $5,000 to subsidize hotel fees of returning employees. Most western countries and Singapore, Hong Kong's main regional rival financial center, eased travel restrictions in 2021.
Multicultural hub
Residents complain Hong Kong may lose its appeal as a multicultural financial hub. An American Chamber of Commerce, or AmCham, survey released Jan. 19 showed 44% of Hong Kong residents are considering leaving due to COVID-19 restrictions.
Singapore is likely to be a beneficiary of an exodus, the AmCham report said. Bank of America Corp. is reportedly starting to relocate some of its Hong Kong personnel to Singapore, according to a Jan. 27 Financial Times report. Deutsche Bank AG's Asia-Pacific CEO has been based in Singapore since 2020, although the previous chief was based in Hong Kong.
The population in Hong Kong declined 1.2% year over year to 7.39 million in mid-2021, the city's Census and Statistics Department said in August 2021.
Still, Hong Kong's financial sector offers many growth opportunities, KPMG said. Banks' net interest margins, a key metric for their profitability, are likely to have bottomed out in 2021 and there is an expectation of interest rates to rise in 2022, McSheaffrey said. Loan books of Hong Kong's banks have also demonstrated resilience throughout 2021, and improved economic sentiment may feed into loan growth in 2022. Banks are also unlikely to see a significant increase in bad loans this year, KPMG said.
Hong Kong Exchanges and Clearing Ltd., one of the world's largest IPO markets, hopes to have more listings in 2022, including via a framework for special purpose acquisition companies. The city is a part of the Greater Bay Area Wealth Management Connect program that allows banks to tap business in nine cities in mainland China, Hong Kong and Macao.
