Analysts are predicting Bank of East Asia is set for a downward rerating. The 23 per cent jump in interim profit attributable to shareholders to June 30 was good, but few analysts expect to dramatically alter their year-end profit forecasts. The Estimate Directory forecast 11 per cent growth at $1.8 billion at December 31, with earnings per share by the same margin to $1.70. This places the share on a 1996 price/earnings ratio of 16.6 times, against 13.6 times on the Hang Seng Index and 16.8 times on Hang Seng Bank. In relative terms, investors are expected to shift away from Bank of East Asia in favour of Hang Seng Bank, where the quality of the balance sheet, the loan book, expected profit growth and the management are deemed superior. Analysts were told yesterday key growth areas remained in personal loans and consumer finance. This is a sector where some investors might prefer to back Hang Seng Bank over Bank of East Asia. Although loan growth at Bank of East Asia was respectable, mortgage loan growth in Hong Kong was unexciting. China loan growth was good, up about 58 per cent, but there is concern about the level of risk in this high-margin sector. The quality of the loan book is being watched. Although the proportion of loans has dropped from 1.66 per cent of total advances to 1.62 per cent, the absolute total has risen a worrying 18 per cent to $922 million. Concern is being focused on provisioning. Although provisioning for bad and doubtful debts more than doubled to $188.4 million, 80 per cent of the total was linked to specific provisions linked to three corporate clients. This means general provisioning was not high and is not in line with the general provisioning seen in the present reporting season among competitors. This is a concern as analysts question whether the level of provisioning against mainland business activities is adequate.