Hang Seng Bank has reported better-than-expected growth in first-half net profit, but its bad-debt provision also rose substantially.
The Hong Kong-based subsidiary of HSBC yesterday posted a 14 per cent profit gain to HK$9.3 billion, driven by growth in traditional lending and trading, which was partly offset by a 5 per cent drop in fee income as investors pulled back investments amid volatility. But the bank still beat market expectations of 5 to 10 per cent growth.
Announcing the results for the first time, new vice-chairwoman and chief executive Rose Lee Wai-mun said the first-half result was satisfactory, but she warned of tougher times ahead. 'The second half is full of uncertainties that will be a challenge to the banking sector ... The euro-zone crisis won't be solved in the near term, while banks will have to offer higher interest rates to compete for deposits, particularly yuan deposits. We will continue to [be prudent].'
Lee said Hang Seng had very little European sovereign debt exposure and had stopped investing in Europe.
But a high bad-debt figure cast a cloud over the otherwise strong results. Bad debts rose 57.6 per cent to HK$249 million because of credit downgrades of some corporate clients. Bad-debt provision for individual firms rose even more sharply, by 661 per cent, to HK$128 million.
Lee, however, said: 'Bad-debt provisions rose because of a low base last year. Bad debts represent only 0.33 per cent of our total loans, which is at a very low and healthy level. China's economy may slow down a bit but there is no widespread credit-quality problem on the mainland.'