Hang Seng Bank net profit tumbles 54pc
Accounting gain a year earlier and lower property revaluation cited for drop to HK$8.5b, but chief points to growth across business groups
Hang Seng Bank said net profit dropped 54 per cent to HK$8.47 billion in the first six months of this year mainly because of a one-off accounting gain in the same period last year and lower property revaluation.
The subsidiary of HSBC Holdings said the one-off HK$9.52 billion gain had resulted from a change in accounting procedures for its investment in Industrial Bank, which came after a share placement in 2012 diluted its holdings in the mainland lender.
"Under challenging operating conditions, Hang Seng Bank achieved good growth, with increases in income and profit across all business groups in the first half of 2014," said Rose Lee Wai-mun, the bank's vice-chairman and chief executive. "Overall credit quality was relatively stable. The group remains cautious on the credit outlook."
Excluding the impact of the Industrial Bank gain, net profit fell 5 per cent amid a decrease of HK$769 million in the valuation of net surplus on properties.
Operating profit rose 6 per cent to HK$9.5 billion, thanks to growth in customer lending and fee income in Hong Kong and on the mainland.
Net interest income grew 8 per cent to HK$9.67 billion, boosted by a 4 per cent gain in interest-earning assets including an 8 per cent growth in customer lending.
The bank also enjoyed a wider net interest margin - the gap between the interest rate it charges borrowers and the rate it pays depositors - to 1.92 per cent, an improvement of 8 basis points.
Net fee income grew 4.3 per cent to HK$3.06 billion due to strong growth in fund sales, insurance products and credit card fees, but the gain was offset by a 4.5 per cent fall in stockbroking commissions on weakness in the equity market.
Bad-debt provisions in the half rose 70 per cent to HK$337 million due to a downgrade of some mainland corporate customers in its mainland business.
Operating expenses increased 6.8 per cent to HK$4.64 billion because of the development of a new network for mainland operations and higher staff costs, which rose 5.8 per cent.
Hang Seng's mainland business was hurt by Industrial Bank, causing net profit before tax of the mainland business to dive 98 per cent. Excluding Industrial Bank, operating profit before tax was up 26.4 per cent, with stronger trade-related business and treasury products sales delivering a 35.9 per cent growth in fee and commission income.
A second interim dividend of HK$1.10 per share will be paid, bringing the total dividend for the first half to HK$2.20 a share, unchanged from last year.