Bank of East Asia

BEA profit grows 9.2pc to record HK$6.6b

Higher interest income and improvement in bad loans drive 9.2pc gain in profit to beat forecasts

PUBLISHED : Tuesday, 18 February, 2014, 2:38pm
UPDATED : Wednesday, 19 February, 2014, 3:42am

Bank of East Asia has posted a record net profit for a fourth year - rising 9.2 per cent to HK$6.6 billion - thanks to higher interest income and an improvement in bad loans in the second half of last year, beating analysts' expectations of a slight fall.

At a post-results press conference yesterday, David Li Kwok-po, the chairman and chief executive of the largest family-controlled lender in Hong Kong, brushed aside talk of a sale, saying he would only consider selling the lender if "someone offers a price-book ratio of three to four times".

After the acquisition of Chong Hing Bank by Guangzhou government-backed Yue Xiu last year - at a price-book ratio of 2.08 times - only three family-controlled banks are left in the city, with Wing Hang Bank, the second-largest, engaged in talks with Singapore's Oversea-Chinese Banking Corp about a sale.

Dominic Chan, an analyst at BNP Paribas, said last month that he expected it to take a price of 2.3 to 2.4 times book value to get that deal done.

Li said increased regulatory restrictions on the running of banks led to the declining number of family-controlled lenders, which were also finding it hard to compete with the local branches of mainland banks.

BEA's improved asset quality and better cost control have seen its shares surge in the past month. They closed up 2.96 per cent at HK$31.35 yesterday after jumping as much as 5.4 per cent.

Analysts expect another good year for BEA this year.

"The results are quite good and 3 per cent ahead of our expectation," said Grace Wu, an analyst at Daiwa Capital Markets. "We expect further net profit growth this year, as it will continue to enjoy loan repricing to boost its margin."

Li said the bank's prospects rested on its cross-border business due to the internationalisation of the yuan and mainland investors' growing interest in offshore markets.

Impairment losses at BEA grew 98.6 per cent to HK$527 million last year, but the bank said the losses "were still at a reasonable and controllable level". Its impaired-loan ratio rose to 0.39 per cent from 0.32 per cent in 2012.

Net interest margin, a gauge of lending profitability, jumped 23 basis points to 1.9 per cent by the end of last year.

Deputy chief executive Brian Li Man-bun, who oversees the lender's mainland and international businesses, said the gain was due to an increase in the interbank rate on the mainland, which helped its subsidiary BEA China earn more from deposits.

Some analysts said the gain could be unique to BEA because mainland loans accounted for more than 40 per cent of its loan book.