Hang Seng Bank yesterday marked its 80th birthday with a 15 per cent rise in net profit for last year, which was driven by an increase in fee income and a drop in bad-debt provisions.
Analysts warn of a challenging year ahead because of macroeconomic uncertainties facing the mainland and Hong Kong.
The HSBC subsidiary said net profit was HK$19.43 billion, just ahead of market expectations.
Vice-chairman and chief executive Rose Lee Wai-mun said profit growth was also driven by the sale of its general-insurance business, while contributions from associates rose 33 per cent, mainly from Industrial Bank on the mainland.
Hang Seng said in January that it would no longer account for Industrial Bank as an associate following its completion of a private placement but it would report it as a financial investment.
"Looking ahead, we believe this year we will continue to see stable growth in loans and other business as the mainland's exports have increased while Hong Kong's unemployment rate is low," Lee said after cutting a cake to celebrate the bank's birthday. The bank was set up on March 3, 1933.
A 5 per cent increase in fee income to HK$5.09 billion from better sales of life insurance policies and investment fund products helped lift overall profits. Provision for bad debt was cut by 12 per cent to HK$386 million while loan impairment charges dropped 45 per cent in the second half of the year from the first.
The bank also benefited from a wider net interest margin - the gap between its funding cost and the interest rate it charges clients - which stood at 1.85 per cent last year, up seven basis points from 2011. Net interest income grew 7.7 per cent to HK$16.95 billion.
Ben Kwong Man-bun, the chief operating officer at KGI Asia, warned of tough times ahead. "The bank's mortgage business in Hong Kong and the mainland may be affected by government policies to cool the overheating markets," he said. "In addition, the outlook for the mainland economy is still full of uncertainties while Hang Seng's interest margin faces pressure."
However, Lee played down the worries. "Our customers are mainly end users who would not be hard hit by the government policies that are aimed at [property] speculators," she said.
Lee said the bank would continue to expand its business on the mainland, where it has 46 outlets. The mainland contributed 25 per cent of pre-tax profit, against 22 per cent in 2011.
With earnings per share of HK$10.16, the bank will pay a fourth interim dividend of HK$2 per share, bringing the full-year payout to HK$5.30 per share from HK$5.20.