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SCMP Reporter

Lower returns from liquid funds have forced Liu Chong Hing Bank to report a 23.81 per cent fall in attributable profit for the first half of the year.

 However, analysts said the bank was well-placed to benefit from the SAR's recovery because it was very liquid and its businesses were still growing.

 Attributable profit for the six months to June was $184.88 million, down from $242.64 million a year earlier.

 The bank's interest income dropped 20.83 per cent to $1.09 billion, while interest expenses eased 23.89 per cent to $697.27 million, resulting in a 14.78 per cent decline in net-interest income to $401.70 million.

 Executive director Nam Lee-yick said the bank had directed $11.9 billion of its funds to the relatively more liquid but lower-yielding business of interbank lending.

 The bank also holds $1 billion worth of Exchange Fund notes, which generate yields even lower than interbank lending.

 This had led to the decline in interest income but boosted the bank's liquidity ratio to 58.71 per cent, among the highest in the sector.

 The net-interest margin was 2.48 per cent, slightly lower than the 2.49 per cent in the second half last year but much lower than the 2.97 per cent in the first half of last year.

 Total loans shrank 1.4 per cent to $17.56 billion but loans to property development, home purchases and credit-card spending registered positive growth.

 'We actually kept lending to the economy. But loan repayments are much faster than new loan creation,' Mr Nam said.

 He said lending to the commercial sector amounted to more than $600 million, most of which went to new customers. Demand for commercial loans also increased rapidly last month.

 The bank did not write back excessive general provisions no longer required, given the lower loans outstanding. Instead it made an additional $86.31 million in specific provisions, up from $68.39 million a year ago.

 Liu Chong Hing Bank's loans overdue for more than three months amounted to $1.34 billion, of which $980 million or 72.59 per cent were backed by collateral valued at $1.45 billion.

 Nomura Securities' head of North Asia banking research Anthony Lok said the bank shared a similarly conservative strategy with other family owned competitors.

 He said that, as the bank remained very liquid and continued to lend to the commercial sector, it would be among one of the first to benefit from the SAR's recovery.

 Earnings per share were 43 cents, down from 56 cents a year earlier.

 An interim dividend of 15 cents will be paid, down from the previous 16 cents.

RESULTS 



Brighter times ahead as banks well placed for benefits of SAR recovery