BANK of East Asia (BEA) got the thumbs down from the market after posting a worse-than-expected result, including its first ever disclosure of transfers to inner reserves.
It reported after-tax profit of $1.54 billion for the year to December 31, up 39 per cent on 1993 and proposed a one-for-five bonus issue.
The result included exceptional profits of $423.12 million from the sale of residential units at BEA's Kennedy Town property development.
Analysts expressed concern about core profitability and about the lower than expected level of transfer to inner reserves. Operating profit for 1994 was $1.84 billion, against $1.36 billion in 1993.
BEA transferred $147.5 million, or 9.5 per cent of after-tax profits to inner reserves - well down on the 25 per cent figure expected by the market. In 1993, it also transferred 9.5 per cent of profits.
After opening at $25.80, the bank's shares traded to a high of $26 before closing near $25.45, after recovering from a low of $25.15 during the afternoon session.
BEA deputy chairman and chief executive David Li Kwok-po said 1994 profit growth in the Hong Kong banking sector was subdued because of the slowdown in mortgage lending and eroded net interest margins. 'As Hong Kong interest rates began to rise at the beginning of 1994, Hong Kong dollar deposits grew more rapidly than foreign currency deposits,' he said.
