Most Hong Kong lenders are unlikely to surprise the market this earnings season the way Bank of East Asia did on Tuesday, when it revealed the damage credit-card default did to its 2002 results. However, BEA exposed a bigger issue: the problem of bad credit-card debt would not quickly disappear, analysts said. 'It's unrealistic to assume [the surge in bad credit card debt] is going to come off anytime soon,' Goldman Sachs banking analyst Ray Ramos said. BEA, Hong Kong's fourth-largest bank, reported on Tuesday net profit last year fell 19.5 per cent to HK$1.29 billion, largely due to a steep provision for bad debts, which rose 87.6 per cent to HK$810.93 million. The bank blamed a surge in the number of personal bankruptcies for the sharp increase in mortgage and credit card defaults. BEA wrote-off HK$355 million in credit card debt, more than four times the level in 2001, and said its charge-off ratio, or the portion of its portfolio that went bad, reached 19.3 per cent, well above the industry average of 13 to 14 per cent. Analysts are bracing for similarly bad news from other Hong Kong banks this reporting season, particularly Standard Chartered and Dah Sing Financial. 'Dah Sing and Standard Chartered are the most heavily exposed to credit cards as a proportion of their loan book,' said Alan Chua, an analyst at HSBC Securities. But analysts said both banks had been transparent about their exposure. Anna Borzi, regional banking analyst at HSBC, said Standard Chartered 'will definitely be hit on this front but I don't think they're going to shock [the market]. They've been quite explicit about their exposure'. Sun Hung Kai Research analyst Maggie Choi said Dah Sing's charge-off ratio was unlikely to veer far from the market average. Mr Ramos said: 'There will be nothing like the surprise we got at BEA.' Standard Chartered, which reports its results next Wednesday, is expected to report a HK$5.04 billion net profit, down from HK$5.45 billion the year before, based on a consensus forecast from Thomson Financial. On March 4, Dah Sing is expected to report a HK$872.4 million net profit, slightly up from HK$868.2 million in 2001. Graphic: asia13gbz
