Dah Sing to strengthen mainland presence by investing 1.1b yuan
Dah Sing Banking Group, a Hong Kong-based medium-sized lender, may spend more than 1.1 billion yuan to expand in the mainland in the second half after reporting 8.8 per cent growth in first-half net profit.
Managing director Wong Hon-hing said the bank would strengthen its presence in the mainland, setting up a unit incorporated in Shenzhen and increasing its stake in Chongqing Commercial Bank to 20 per cent from 17 per cent.
Dah Sing's net profit for the six months to June rose to HK$616.08 million from HK$566.3 million a year earlier as a larger loan book boosted net interest income by 6.9 per cent to HK$1.02 billion.
Its net interest margin, however, shrank 19 basis points to 2.27 per cent on a narrowed gap between the prime lending rate and interbank rate, Mr Wong said. 'It's more likely to see its net interest margin narrow further than widen [in the second half],' he said.
Mr Wong said Dah Sing did not have any direct exposure to subprime mortgages but had invested about US$122 million in a bond fund. The US$30 billion fund invested about 7 per cent of its assets in mortgage-backed securities.
He said the securities the bond fund held were mainly rated AAA and had not seen any problem so far.
The bank would keep monitoring the situation, he said.
Dah Sing's net fee and commission income rose 18.7 per cent on higher wealth management income.
Meanwhile, parent Dah Sing Financial Holdings said first-half net profit dropped 8.8 per cent from a year earlier to HK$664.18 million.
Excluding an exceptional gain of HK$189 million arising from the sale of a 3.6 per cent stake in Dah Sing Bank last year, profit rose 23 per cent.
Pre-tax profit from insurance rose 54.2 per cent to HK$157 million, accounting for 19 per cent of the group's pre-tax profit.
Mr Wong said the group hoped that insurance would account for 30 per cent of pre-tax profit in three years' time as it sought to grow organically and through acquisitions.
'Dah Sing still has its catalysts, which are the Macau and insurance businesses, despite a narrowing net interest margin,' a US brokerage analyst said.
However, the group remained unattractive to investors as its mainland expansion needed to take two to three years before achieving reasonable profit while the stock price was not cheap, the analyst said.