Falling interest income earned on a barely changed loan book plus a higher bad-debt charge have left Wing Lung Bank's bottom-line profit last year 16.3 per cent lower on the previous year at HK$845.8 million. The mid-sized 35-branch retail bank reported a 10.8 per cent fall in net interest income, generated on total advances up just 1.08 per cent at HK$28.75 billion. The sharp fall in interest income came against a background of a falling average loan-to-deposit ratio and a narrowing interest-rate spread resulting from severe pricing competition, the bank said in a statement released with the results yesterday. Along with the 11 interest-rate cuts made in Hong Kong to match rate cuts announced by the United States Federal Reserve, these events served to drag down interest income and returns on free funds, the bank said. The resulting fall in net interest income might have been more severe had it not been for a tight rein kept on costs, which saw interest expense decline 31.6 per cent to HK$1.92 billion, from HK$2.8 billion previously, the bank noted. A 27.1 per cent rise in the charge for bad and doubtful debts, up to HK$113.51 million from HK$89.29 million previously, left operating profit down 19 per cent at HK$979.5 million. Almost 45 per cent of Wing Lung's Hong Kong loans are in residential mortgages, which saw yields falling sharply lower as a result of repricing pressures, and government-subsidised housing schemes. The bank said that, to achieve a more balanced loan growth, it had diversified its loan book. It said: 'It is unlikely that the property market will improve in the near-term. 'To this end, the bank will be keeping a close eye on market developments and [will] revise our strategies to meet the changes in order to safeguard our market share and better position ourselves to reap the benefits when the economy rebounds,' it said.