Bank of East Asia counts cost of bad credit cards

The reporting season for Hong Kong's banks got off to a terrible start yesterday as Bank of East Asia disclosed that it lost nearly $1 million a day on bad credit cards last year.

Rising joblessness, falling property prices, and a record number of personal bankruptcies forced Hong Kong's fourth largest bank to write off nearly a fifth of its card portfolio.

Analysts were surprised by how bad the figures were, as the bank blamed the tide of personal bankruptcies for a 19.5 per cent slide in net profit to $1.29 billion. This included an $811 million provision for bad and doubtful debt, nearly double the previous year's.

'The sharp rise in personal bankruptcies dented our performance,' chairman David Li Kwok-po said.

The bad debt provision took into account a $355 million charge on credit card defaults, more than four times the 2001 level.

BEA's credit card charge-off ratio, or the portion of its credit card portfolio that went bad, reached a steep 19.3 per cent, well above an industry average of about 13-14 per cent.