Hang Seng profit up 26pc
HANG Seng Bank has posted profits well above market expectations and showered shareholders with largesse to mark its 60th anniversary, despite heavy provisioning against collapsed international property developer Olympia & York.
But behind the rosy earnings, the figures for the year ended December 31 painted a picture of slackening growth momentum on several counts in what may be a harbinger of tougher times for the local banking sector.
Hongkong's largest purely local Chinese bank saw net profits rise 26 per cent on a fully disclosed basis to $5.7 billion from $4.52 billion in 1991, an increase which was marginally higher than the 25.7 per cent growth recorded in 1991.
Earnings per share followed suit, rising 26 per cent to $3.83 from $3.04.
Stock market analysts, who praised the result as ''marvellous'' and ''creditable'', had been hopeful for more details - particularly regarding the US$100 million O & Y exposure - from the bank in its first final result announced on a fully disclosed basis.
As Hang Seng Bank's biggest shareholder with a controlling stake of 61 per cent, HSBC Holdings was the primary beneficiary of a total dividend payout which, including an anniversary bonus of 27 cents a share, doubled from $1 to $2 a share, comprising more than half of attributable profits.
A three-for-10 bonus share issue was also declared.
A property revaluation conducted in November last year showed a consolidated surplus of market value over-book value attributable to shareholders of $4.14 billion.
Including the surplus from the previous revaluation three years earlier, the total surplus shown in the accounts as reserves was $8.84 billion as of December 31.
In an unprecedented revelation about the composition of the bank's loan portfolio, chairman Sir Quo-wei Lee said yesterday that 97 per cent of advances were for use in Hongkong.
In an effort to allay concerns of analysts following the surprise disclosure of the O & Y loan, he emphasised that the remaining three per cent of the loan book included all China lending, loans granted by branches in the United States and the O & Y exposure.
Sir Quo-wei declined to reveal the level of provisioning taken against the O & Y loan, noting that his bank had no tradition of such disclosure, but stressed that the charges were ''very conservative''.
Most analysts estimate that provisioning was in the range of 40 per cent last year, with a further 10 per cent yet to be taken this year.
According to executives, the bank boosted earnings significantly in foreign exchange and treasury operations, income from investment, fee income and rental from properties.
''Essentially they grew their profits at the same rate as a year earlier, which is great - despite O & Y, despite reduced mortgage lending, despite lower asset growth,'' said one analyst.
''They must have really compensated in other areas.'' But the vital signs are flagging, and Sir Quo-wei himself termed the prospects for the coming year as a qualified ''all right''.
Hang Seng's deposit growth logged in a meagre 2.5 per cent growth for the year, following a 13.7 per cent growth in 1991.
Total asset growth nosedived by more than half to 5.5 per cent from 14.2 per cent in 1991.
Loans and advances to customers saw a more dramatic plunge in growth to 6.1 per cent from 18.5 per cent.
Although the domestic economy posted five per cent growth last year, the growth in bank deposits territory-wide receded as investors sought higher returns in an inflationary environment.
This had resulted in intense competition, and thus higher costs, for funds.
The bank is also streamlining its personnel and organisational structures to achieve productivity gains.
