A substantial threefold increase in specific provisions led Dah Sing Financial Holdings to report a sharp 34.8 per cent decline in attributable profit for the first half, with its net interest margin seriously eroded by rising funding costs. Attributable profit for the six months to June was $227.11 million. This was down from the previous $348.5 million but was in line with market expectations. Specific provisions jumped 317.5 per cent from $15.73 million to $65.67 million. This reflected the effects of the more difficult operating environment, the company said. Group financial controller Gary Wang said most of the charge had come from trade finance and corporate exposure, while no delinquencies were recorded from residential mortgages in the first half. The provisions made against the group's hire-purchase portfolio - most of which were for taxi licences, which suffered a dramatic correction in value last year - were $18 million. Non-performing loans - with repayment of interest and payment overdue for three months or more - rose 186.4 per cent to $179.82 million from $62.77 million in December. This dramatic increase boosted the ratio of non-performing loans to total loans to 0.65 per cent from 0.23 per cent six months ago. Nomura International head of North Asia banking research Anthony Lok said the group's non-performing loans should be higher at $245.49 million, or 0.88 per cent of total loans, if the $65.67 million written off was included. Managing director Ronald Carstairs said the group had pledged to control its asset quality more effectively and would personally prefer to keep this ratio under 1 per cent by the end of this year. He said the second half would be a period during which the group should look for better management of its existing business rather than expansion. The group, which controls the 43-branch Dah Sing Bank, saw loans grow only 1.8 per cent in the six-month period to $27.8 billion. It only needed to make a $4.48 million general provisions charge for this growth in loans, down from $33.86 million six months ago. The 5.3 per cent decline in customer deposits pushed the group's loan-to-deposit ratio to 80.4 per cent, from 71.9 per cent in December. The group has proved more vulnerable than its peers to the negative impact of rising funding costs in the first half, after revealing its net interest margin had declined to 2.82 per cent from 3.54 per cent in 1997. Earnings per share were 94 cents, down from the previous 145 cents. An interim dividend of 30 cents will be paid, down from 51 cents a year ago.