Bad loans in China see BEA net profit grow just 0.7pc

Bank of East Asia profit growth nearly ground to a halt  last year, with bad debts on the mainland  the primary damper.

The bank, Hong Kong’s largest locally owned lender, brought in HK$6.66 billion in profits, a 0.7 per cent increase on 2013 that analysts called “disappointing”, even given the mainland’s slowing economy. Profits grew by more than 9 per cent just a year earlier.

“This has been a difficult period,” William Cheng, BEA’s chief financial officer, told a press conference  on Thursday, although he emphasised that the deterioration in asset quality remained manageable.

Bad loans  on the mainland, and high impairments there, were to blame, the bank said.

The mainland’s slowdown affected BEA China’s asset quality in the second half last year, with its mainland operation’s impaired loan ratio jumping to 1.32 per cent by the end of the year, from just 0.49 per cent at the end of 2013. The bank’s overall impaired loan ratio stayed low, at 0.62 per cent

Charges for impairment losses on loans hit HK$990 million, surging 116 per cent over the HK$458 million the bank notched up in 2013.

The bulk of those impairments were concentrated on the mainland, with one 380 million yuan loan extended to a hotel constituting nearly half of the charges, BEA deputy chief executive Brian Li, the son of chairman and chief executive David Li, said, adding that the collateral on that loan was good and the bank expected to recover it this year.