Acquisitions, interest gain lift Dah Sing profit to HK$1.2b
Lender buys into Chongqing bank as it expands in mainland
Dah Sing Banking Group, a Hong Kong-based mid-sized lender, said last year's profit rose 22.2 per cent, driven by acquisitions and higher interest income.
Profit rose to HK$1.2 billion from HK$978.8 million a year ago. Taking out the HK$100 million profit contribution from Pacific Finance and Banco Comercial de Macau, two units that it bought in 2005, earnings rose 12 per cent.
Net interest income surged 42.4 per cent to HK$1.9 billion as net interest margin widened 38 basis points to 2.36 per cent, thanks to loan growth and the two acquisitions.
'We are looking forward to the continuation of relatively stable and positive economic conditions in 2007,' Dah Sing Bank said in a statement. 'However, loan growth in the domestic banking market in Hong Kong is likely to remain relatively slow and price competition in core lending areas is expected to remain intense.'
Margins of lenders in Hong Kong were squeezed early this year as many cut their prime lending rates to grab mortgage business while the interbank rate, a measure of funding costs, remained largely stable.
Dah Sing Bank is expanding in the mainland, making its first acquisition, a 17 per cent stake in Chongqing Commercial Bank, which managing director Derek Wong Hong-hing said was expected to be completed in the first half.
The bank, which has a branch in Shenzhen, also plans to set up a locally incorporated unit, a requirement for foreign lenders to be able to conduct yuan-denominated business.
Its rival Bank of East Asia last week won final approval to incorporate in the mainland, while Hang Seng Bank and Wing Hang Bank received preliminary approvals.
'It's important for the bank's future development as the economy in the mainland grows rapidly,' Mr Wong said.
Dah Sing Bank's net fee and commission income rose 30.7 per cent last year as the increase in wealth management services more than offset a decline in net trading income.
Meanwhile, its parent Dah Sing Financial Holdings said last year's profit rose 37.1 per cent to HK$1.4 billion from HK$1.02 billion a year ago.
Excluding an exceptional gain of HK$189 million arising from the sale of a 3.6 per cent stake in Dah Sing Bank, profit rose 18.5 per cent to HK$1.21 billion.
Pre-tax profit from insurance rose 28 per cent to HK$273 million with net insurance premium income rising 34 per cent to HK$1 billion.
Dah Sing Bank proposed to pay a final dividend of 45 HK cents per share, while Dah Sing Financial declared a final dividend of HK$1.6 per share.
Mr Wong said the companies would maintain a payout ratio not less than 50 per cent for the banking group and 45 per cent for its parent.
Shares of Dah Sing Bank fell 0.47 per cent to close at HK$16.78 yesterday while Dah Sing Financial fell 0.65 per cent to close at HK$68.15.