International Bank of Asia (IBA) has reported a 70.9 per cent fall in net profit to $23.83 million for the year to December 31, confounding expectations of a significant earnings rise. The bank's earnings per share dropped to 2.03 cents from 7.66 cents in the previous year on higher provisions for bad loans and a fall in fees. The results were in stark contrast to analysts' consensus forecast of a 63 per cent profit increase and earnings per share of 13 cents. Analysts had assumed IBA would need to make much lower provisions against bad and doubtful loans. However, the bank's provisioning was up a year on year 10.1 per cent to $373.8 million. IBA said its portfolio of non-performing loans declined to $750 million in the year from $774 million as of June last year. Mainland-related bad loans accounted for $277 million of the portfolio. The bank said provisioning for these loans - including collateral - was raised to a coverage of 48 per cent. The bank said it had a Hong Kong bad-loan book of $473 million with a coverage ratio of 96.2 per cent, including collateral. Managing director and chief executive officer Mike Murad said IBA had fully provided for the non-performing loans. Mr Murad also said he believed results for the present year could benefit from the first of several write-backs as the economic climate in the region improved. The chief contributor to IBA's decline in earnings was sharply lower fee-based revenue. The bank said non-interest (fee) income last year dropped 41.7 per cent to $118.6 million. Mr Murad attributed the decline to a poor lending environment for all banks. 'Fee income dropped, reflecting lower consumer spending, external trade and corporate investment,' he said. Moreover, IBA, which is regarded as being among the more aggressive issuers of credit cards, had waived annual fees in order to remain competitive, Mr Murad said. Lower revenue from discounting trade bills and the banks' share-broking division, also affected fee income. At $663.9 million, net interest income was almost unchanged from the previous year's $664.1 million, due chiefly to a tight rein kept on interest expenses. Interest expenses fell 32.31 per cent last year to $1.14 billion. Planned Internet initiatives, according to Michael Ipson, executive vice-president of corporate and investment banking, would include the roll-out next week of account-checking and transfer services offered on the bank's Web site. IBA's share price gained 5.47 per cent to close at $1.54. The bank's stock ended the day with a price-earnings ratio of 75.86, and it is likely to come under pressure in the wake of the poor results, according to brokers.