UPDATE 1-HKMA says loans from European banks up 5 pct in 2011

By Kelvin Soh

HONG KONG Jan 18 (Reuters) - Loans from European banks to clients in Hong Kong fell 6 percent in December from a month earlier, but it is still too early to say if euro zone lenders are pulling back from Asia, the Hong Kong Monetary Authority said on Wednesday.

For the whole of 2011, European loans to Hong Kong rose 5 percent, said HKMA Deputy Chief Executive Arthur Yuen.

"Overall, European banks' operations in Hong Kong have remained stable," Yuen said. "The December numbers are still a single point, and whether it's a seasonal issue or the beginning of a trend is still not clear."

Under pressure from a spiralling debt crisis at home, many European banks have begun offloading more of the loans they hold in Asia, squeezing up lending rates and making it tougher for small and medium-sized companies to borrow.

Standard Chartered Plc Asia Chief Executive Jaspal Bindra said earlier this month European banks had begun displaying early signs of pulling back from loans in Asia, presenting an opportunity for other lenders to gain market share.

On Tuesday, a consortium of Chinese banks including Industrial and Commercial Bank of China Ltd and China Development Bank Corp agreed to lend $1.18 billion to Indian billionaire Anil Ambani's debt-laden mobile carrier Reliance Communications Ltd.

HKMA's Yuan also said the banking sector in Hong Kong remained resilient despite heightened uncertainties in the external environment.

The sector's profitability rose in 2011 on increases in interest and non-interest income, although retail banks' net interest margins fell to a historic low of 1.23 percent in the first three quarters.

Yuan added that the HKMA would continue to monitor the development of the domestic property market and the impact of the European sovereign debt crisis on Hong Kong's banking sector.