Dah Sing posts HK$1b write-down
Dah Sing Banking Group became the latest small to medium-sized local bank to feel the impact of the United States subprime mortgage crisis, posting a HK$1.04 billion write-down that depressed annual profit by 33.1 per cent.
The lender said the impairment charge was made for its leveraged investment and structured investment vehicles (SIV) and represented 67 per cent of its HK$1.56 billion exposure.
Without a business presence in the US, many Hong Kong banks have been exposed indirectly through investments.
Earlier this month, Wing Lung Bank and Chong Hing Bank took subprime mortgage-related provisions totalling HK$963.63 million.
Dah Sing's provision dragged down its net profit to HK$800.17 million last year from HK$1.2 billion in the previous year.
With its investments graded BBB or below, managing director Wong Hon-hing said the group would not rule out the possibility of further write-downs on its remaining HK$518 million exposure to SIVs and leveraged investments.
Mr Wong stressed that the bank did not hold any other investments in collateralised debt obligations or SIVs.
Kim Eng Securities analyst Ivan Li Sing-yeung described the level of the provision as a 'negative surprise'.
In Dah Sing's interim results announcement in September last year, the management denied the possibility of such a large provision.
At the time, Mr Wong said the bank had invested about US$122 million in a US$30 billion bond fund that had about 7 per cent of its assets in mortgage-backed securities. He said the securities that the bond fund held were mainly rated AAA and 'had not seen any problem so far'.
Mr Li said core business last year was not good enough to salvage the bank's overall performance.
Operating profit before impairment losses was up 18.5 per cent at HK$1.69 billion, from HK$1.43 billion a year earlier. This lagged behind peers such as Chong Hing Bank, which posted a 44.39 per cent rise in operating profit before impairment losses.
Dah Sing proposed a final dividend of 15 HK cents.
The payout ratio was 46.6 per cent, against 54.5 per cent previously. The management said the lender intended to reserve more resources for development opportunities.
Shares of Dah Sing closed up 2.96 per cent at HK$12.54 yesterday.