Sars may be on the wane but many Hong Kong banks are still to feel the real pain from credit-card bad-debt problems caused by the outbreak, analysts warned. This is despite the Hong Kong Monetary Authority yesterday reporting an improvement in the first-quarter credit-card bad debt ratio. The analysts said Sars was affecting employment and causing more people to delay repaying credit card loans, and some to go into bankruptcy. 'These factors will lead to banks writing off more credit-card bad debt in the second quarter,' said Tracy Yu, UBS Warburg director and head of banking research for Hong Kong and China. 'We all know the charge-off ratio will increase in the second quarter. The only uncertainty is to what extent.' Phillip Securities' head of research Louis Wong Wai-kit agreed the situation would worsen in the second quarter. 'More people are losing their jobs because of Sars and this will lead to more credit card bad debt,' Mr Wong said. 'But banks with different business models will be affected differently.' He said Dah Sing, Wing Hang and Aeon would be hardest hit because they relied on credit-card loans. However, HSBC, Hang Seng Bank and Bank of East Asia would be less affected as they had a more diverse loan portfolio. Mr Wong said the first-quarter improvement would not offset the second-quarter impact and banks' first-half profit would be hit. HKMA deputy chief executive David Carse last week warned banks to accept their profit targets this year would not be met. The HKMA yesterday announced $1.76 billion in credit card bad debt was charged off in the first quarter, equal to 3.09 per cent of average receivables. Assuming the rate was maintained for the next three quarters, the annualised charge-off ratio for the first quarter would be 11.82 per cent, compared with a record 13.45 per cent in the previous quarter. Credit-card receivables fell by 7.9 per cent quarterly to $54.56 billion while the number of cards fell 0.28 per cent to 9.07 million.