Flat earnings fail to sway optimism over takeover
Wing Hang Bank yesterday brushed aside concerns that its acquisition of Chekiang First Bank next month would significantly weaken its capital base, as it posted a flat profit for the first half of this year.
Net profit for the period to June stood at $369.27 million, down 0.18 per cent from $369.96 million during the same period last year amid a backdrop of weak loan demand and high liquidity in the banking system.
However, chairman and chief executive Patrick Fung Yuk-bun said Wing Hang's pending acquisition next month of Chekiang First from Mizuho Financial Holdings should boost the bank's bottom line next year.
'I am sure we can get some [revenue] synergy out of Chekiang First, so I think it will have a positive impact on our income statement next year,' Mr Fung said.
Wing Hang has said it plans to reinvest Chekiang First's excess liquidity into its treasury activities to enhance returns.
Last week, Moody's Investors Service said it would review the ratings of Wing Hang's financial strength, and short-term and long-term deposits for a possible downgrade due to a weakened capital base and integration risk arising from the intended acquisition.
The bank has said it expected its capital adequacy ratio to fall to between 14 and 15 per cent after the acquisition from 16.5 per cent at the end of last year.
Executive director and deputy chief executive Frank Wang yesterday said the bank was confident it would maintain its existing Moody's credit ratings. 'A 10 per cent fall in the capital adequacy ratio in my mind doesn't constitute a weakened state [of capital adequacy],' Mr Wang said.
Wing Hang's net interest income rose 1.15 per cent to $740.62 million from $732.18 million a year ago, as it tightened its credit-card lending by 17 per cent during the period in the wake of high personal bankruptcies last year.
While its loan book contracted by 0.8 per cent and net interest margins by 12 basis points in the first half due to price pressures on mortgages, this was offset by healthy gains in treasury profits.
The bank saw its non-performing loans increase $221.8 million to make up 3.35 per cent of total advances as many people found it difficult to repay mortgages amid the poor job market. This compared with 2.68 per cent at the end of last year.
Wing Hang has declared an interim dividend of 37 cents per share, unchanged from last year.
