DESPITE the lacklustre property market, Bank of East Asia (BEA) plans to increase its mortgage lending through the balance sheet of another bank, United Chinese Bank (UCB), and by setting up an asset securitisation vehicle with property developers. Mapping out the bank's near-term strategy, chief executive and deputy chairman David Li Kwok-po is vying for an increased share of the much-tightened property financing market. Believing that BEA was the highest bidder, Mr Li said the acquisition of the 18-branch United Chinese Bank should be completed soon. With the purchase close at hand, BEA already has drawn up a blueprint for future synergies. 'The bank [UCB] does not have a full book on lending. We can make use of that to expand mortgage lending,' Mr Li said. Gathered from his conversation with major property developers in town, he reckoned that the property market had bottomed out or, if not, only about five per cent from reaching the lowest. That made property financing safer than it had been, he said. He hoped to retain the name of UCB for at least three years and would sell down 49 per cent of UCB's stake to BEA's various business partners in Southeast Asia, building up the necessary network for BEA to become a regional bank for overseas Chinese. However, Mr Li stressed that local Chinese would still be maintaining control of BEA. It will be one step further towards realising the goal of BEA as the bank for the global Chinese entrepreneurial network and a regional bank. Another venture BEA would embark on is to set up an institution with other banks and property developers that resembles the functions of the Government National Mortgage Association (GNMA) or Fannie Mae (Federal National Mortgage Association) in the United States. Fannie Mae and GNMA are government agencies that approve the issue of mortgage-backed securities with repayment of principal and interest fully guaranteed by the US Treasury. Mr Li said the only way to expand mortgage lending was to sell down existing portfolio and taking on more new business. BEA has a full-book dilemma. According to the document of its $1 billion step-up bonds released in June last year, BEA's mortgage lending took up 43.94 per cent of its loan portfolio in 1993. The level slightly exceeded the 40 per cent level the Hong Kong Monetary Authority has been expecting banks to keep. The bank's long-term strategy is to continue building market share in the territory through organic growth and selective acquisitions. Increasing fee income will be one of its major endeavours. Rental income from its Wan Chai building, coupled with renewed effort to develop nominee, trustee and custodian services should boost its non-interest income. But its ambitions extend far beyond Hong Kong in Southeast Asia. It has submitted applications to begin retail operations in the Philippines and establish a presence on Labuan Island in Malaysia along with a joint venture in South Korea. It is also determined to pursue a retail outlet in Taipei. The bank has shifted the focus of its overseas expansion from North America and Europe to Southeast Asia. 'Overseas operations contributed 20 per cent of profit for the bank, mainly generated from operations in China,' Mr Li said.