Bank of East Asia counts cost of bad credit cards
The reporting season for Hong Kong's banks got off to a terrible start yesterday as Bank of East Asia disclosed that it lost nearly $1 million a day on bad credit cards last year.
Rising joblessness, falling property prices, and a record number of personal bankruptcies forced Hong Kong's fourth largest bank to write off nearly a fifth of its card portfolio.
Analysts were surprised by how bad the figures were, as the bank blamed the tide of personal bankruptcies for a 19.5 per cent slide in net profit to $1.29 billion. This included an $811 million provision for bad and doubtful debt, nearly double the previous year's.
'The sharp rise in personal bankruptcies dented our performance,' chairman David Li Kwok-po said.
The bad debt provision took into account a $355 million charge on credit card defaults, more than four times the 2001 level.
BEA's credit card charge-off ratio, or the portion of its credit card portfolio that went bad, reached a steep 19.3 per cent, well above an industry average of about 13-14 per cent.
While BEA's problem is shared by all Hong Kong banks, analysts said it was hit badly on its credit card portfolio and was likely to stand out among its peers in that regard.
Graphic: BEAXGET
