A $281.6 million exceptional gain from property sales helped Dao Heng Bank achieve a strong 62.7 per cent growth in bottom-line interim profit, despite a huge 54.6 per cent increase in bad debt charges. Attributable profit for the six months to December was $1.09 billion, up from $674.7 million a year ago. This figure includes the $281.6 million exceptional gain derived from the sale of the bank's former headquarters on Bonham Strand. Excluding this item, the 95-branch bank's operating profit grew only 24.2 per cent during the period. Bad debts charges were $150.2 million, up from $97.6 million the previous year. The bank attributed the size of the increase to the growth in provisions on the back of a 28.9 per cent increase in lending and 'prudent specific provisions for certain corporate and trade finance outstanding [loans]'. Dao Heng, which is 70.3 per cent owned by Guoco Group, said the strong growth in loans came from consumer finance and property related lending. Despite this, only 25 per cent of the bank's assets are in residential mortgages. The strong loan growth, together with a slower 21.8 per cent increase in customer deposits, lifted Dao Heng's loan-to-deposit ratio to 60.3 per cent from 57 per cent a year ago. This imbalance in loan and deposit growth also boosted the bank's net interest income by 28.8 per cent. Other operating income, which includes fees and commissions, grew a marginal 8.5 per cent to $387.6 million, which made up 26.7 per cent of the bank's total operating income. Operating costs grew only 19.6 per cent, causing a marginal improvement in the cost-to-income ratio from 38.8 per cent to 37.7 per cent. Earnings per share for the half year period were$1.57, up 55.4 per cent from $1.01 a year ago. An interim dividend of 25 cents a share was declared, up from the previous payment of 23 cents. The bank said that although lending margins had tightened, putting pressure on net interest income, the overall domestic interest rate environment remained stable. Dao Heng recently issued a 10-year US$350 million Yankee bond, the largest Yankee issue to date by an Asian, non-Japanese bank and the first subordinated issue by a Hong Kong-based bank.