LAST week, the music began, but more along the lines of Purcell's Funeral March than the theme from Rocky resonating resurgence. Interim results from industry bellwether Bank of East Asia (BEA) and Ka Wah bank, renamed Citic Ka Wah Bank, both revealed huge plunges in profits and reach-for-the-sky provisions. Drops of up to 30 per cent in bottom-line numbers led to reduced dividends and saw the back of the idea that local institutions were immune from Asia's flu. BEA interim profit dropped 30.4 per cent to $716.89 million, while provisions ballooned 500 per cent to $341 million, from $68 million a year earlier. The bank blamed reverses in corporate and trade finance and trouble in South Korea. Analysts said the interims were a good indication of how banks would finish the year. Bear Stearns bank watcher Tom Monaco conceded he was thrown by some of the underlying details, such as BEA's provisions, which were near double what he had forecast. Citic Ka Wah Bank had earlier reported that non-performing loans had reached $1.54 billion, or 7.47 per cent of its loan portfolio. Much of that is thought to be recoverable, through the People's Bank of China. Provisions were nonetheless set at $139.6 million, well up from last years $49.5 million. Profit for the first half fell 28.65 per cent to $191.4 million. Chief executive Cai Zhong-zhi said most of the $1.54 billion in non-performing loans came from credits for use in the mainland. No bank was likely to end the year in the red, analysts agreed. But indifferent year-on-year performances by boutique banks such as International Bank of Asia and First Pacific - with higher capital adequacy requirements expected from the Hong Kong Monetary Authority - could well force shareholders to consider selling. Banks are caught in hard times. Trade finance is dropping faster than the import, export and re-export numbers. Corporate lending in general is looking increasingly doubtful, China-lending even more doubtful. The retail sector, normally a big generator of credit-card income, is at least 15 per cent down from last year. The surge in lay-offs is also starting to skew card income, as payment defaults start to take a bigger share of the bad-debt picture. Dah Sing's card unit reported a trebling of defaults in its first half, from 1 to 3 per cent. Meanwhile, the Hong Kong Monetary Authority only flails, repatriating billions of US dollar-denominated assets to cash up a banking system with liquidity banks would not know what to do with even if there were borrowers in the market at existing interest rates. Last week, the authority withdrew its guideline that stipulated banks must hold down property loans to 40 per cent of overall lending. Now that institutions are stuck with collateral properties worth half what they were a year ago, the authority is sending out signals that it is time to jump back in to a sector in which it was previously concerned banks might get too deep. KPMG's Paul Tsang said banks, if they were to rebuild balance sheets, would have to exercise more prudence, tighten up risk management, broaden technology applications and get control of problem borrowers earlier. The co-author of KPMG's recent annual banking survey also said banks would have to look at operating costs even though local banks were already the world's leanest money-making machines in cost-to-income terms. 'For the last five years, everyone has been diverted by the property and stock markets. We've got to get down to business,'he said. In other words, get out of casino mode and start being competitive again in industry, trade and services.