Wing Hang Bank

Wing Hang Bank net falls but beats forecasts

Bank expects earnings growth for the year after reporting 1.8 per cent weaker profit for first half that is still better than market estimates

PUBLISHED : Thursday, 15 August, 2013, 3:38pm
UPDATED : Friday, 16 August, 2013, 3:41am

Wing Hang Bank, the second-largest family-owned bank in the city by market capitalisation, expects net profit to grow this year as its margins improve.

The bank yesterday posted a 1.8 per cent drop in first-half earnings to HK$1 billion following a decline in the fair value of investments.

The figure was better than a consensus forecast of HK$946 million in a Bloomberg survey.

Compared with the second half last year, net profit jumped 29.8 per cent.

Wing Hang's performance is in stark contrast with the other three family-owned banks in the city, which reported net profit growth ranging from 6 per cent to 35 per cent for the first half.

Wing Hang said its net interest margin would widen in the second half and help to boost interest income.

Net interest income in the first half increased 7.3 per cent to HK$1.6 billion from the same period last year on higher loan volumes and a decrease in deposit funding costs.

Net interest margin (NIM), a measure of profitability based on the spread between interest that banks earn on loans and what they pay on deposits, rose 2 basis points to 1.69 per cent from a year earlier and 11 basis points from December last year.

NIM was expected to improve, chief financial officer Stanley Yuen said, with the bank benefiting from the redemption of its perpetual subordinated notes next month. He said the margin would rise 6 basis points this year after the redemption.

The bank had been approached by unnamed parties for an acquisition but no deal had been made, said chairman and chief executive Patrick Fung Yuk-bun.

Chong Hing Bank last Wednesday confirmed it had been approached for a potential takeover.

That triggered a rally in the shares of the family-owned banks on speculation that they were up for grabs.

Wing Hang shares have gained 4.8 per cent since, although the rise was the slowest among the four.

"We will study each proposal on a case-by-case basis and mainly consider shareholders' interest," Fung said, but declined to elaborate.

Wing Hang is said to be asking too high a price, putting off potential suitors.

DBS Vickers analyst Alexander Lee said Wing Hang had set its price high because its deposit base was bigger than Chong Hing and Dah Sing Bank. "Buyers who want a stronger deposit franchise may be interested in Wing Hang," he said.

Wing Hang's fees income grew 1.6 per cent to HK$423.8 million following improved commissions from its share brokerage, insurance and credit-card businesses.

DBS Vickers maintains a buy rating on the bank's stock, with a target of HK$92.70. The stock yesterday closed unchanged at HK$78.70.