Much hinges on lower charges for bad debt and write-backs of provisions Hong Kong banks will rely on sharply lower bad debt charges and write-backs of previous provisions to report profit growth in their interim results that begin to appear on July 30, say analysts. As basic lending business and interest margins remained in retreat in the first half, earnings growth will depend largely on how well banks have boosted alternative revenue sources - with higher fees generated from the sale of unit trusts expected to offset lower interest income. Bank of China (Hong Kong) is forecast to post the biggest jump in net earnings - a 62 per cent year-on-year increase on its first-half results last year to $4.88 billion, according to Morgan Stanley analyst Amit Rajpal. The bottom-line outcome would mask lower earnings at a core pre-provisioning operating level - likely to be down about 13 per cent at $5.32 billion, he said. The results will also assume that an improving credit outlook will allow zero new provisioning for bad loans, compared with a $1.66 billion charge taken in the first half of last year. Mr Rajpal expected a similar picture to emerge in many of the interim results at local lenders, beginning with those of Bank of East Asia on July 30. Hang Seng Bank would pay the price of bucking the industry trend in the first half and building up its loan portfolio. It did so at the cost of a sharper contraction in its net interest margin than its rivals. The result would be net profit growth of just 2.1 per cent, Mr Rajpal said. Merrill Lynch analysts are more pessimistic, seeing a 4.5 per cent fall in Hang Seng's bottom line. But if the results trigger a retreat in share prices, that could be just the time to buy bank stocks, JP Morgan analysts Craig Turton and Michael Chan suggested. 'It is likely that we will see some severe margin pressure in the upcoming first-half results,' they wrote in an interim profit preview. If share prices retreated by 5 to10 per cent, 'this would be a good opportunity to buy some of the better Hong Kong banks'.