Market looks beyond 26pc profit rise to see a picture of stagnant growth and shrinking interest margins
Investors dumped shares in Bank of East Asia yesterday after the lender reported interim results that showed a 5.4 per cent drop in core operating revenues to $1.32 billion for the first six months.
Looking beyond a bottom line profit that was up 26.2 per cent to $1 billion thanks mainly to lower bad debt charges, investors saw stagnant loan growth and shrinking interest margins and reacted by selling the shares, said Louis Wong, a director with Phillip Securities.
Shares in Hong Kong's fourth-largest lender fell 70 cents, or 3.07 per cent to $22.10 at the close, after hitting an intraday low of $22 shortly after the results announcement. The volume of shares traded - 10.09 million - was more than four times higher than the month's daily average of 2.2 million.
'The result should not have come as such a big disappointment, but investors probably want to see top-line growth which wasn't there despite the growth in the economy,' said Sunil Garg, an analyst at Fox-Pitt, Kelton.
BEA reported that its net interest margin fell seven basis points to 1.94 per cent during the first half. Mr Garg said this was a worrying signal for results due from rival Hang Seng Bank next week.
