Dah Sing Banking Group yesterday posted results that met market expectations despite revealing core earnings that lagged the industry average. The group's net profit rose 27.3 per cent to $1.19 billion on the back of a 61 per cent drop in bad and doubtful debt charges and healthy loan growth in both its retail and commercial banking units. However, discounting the effect of the provision release, operating profit dropped 4.2 per cent, with net interest income and non-interest income both recording slight drops. Some market watchers attributed the drop to hedging activities conducted by the bank to 'sacrifice near-term earnings for long-term growth'. CLSA banking analyst Dominic Chan pointed out that the group had switched the rate structures of a large portion of its bond holdings from fixed to floating, an action that would help offset risk amid rising interest rates. Rival Hang Seng Bank took similar action in 2003, which also led to a steep decline in its interest and treasury income. But managing director Derek Wong Hong-hing attributed the drop in earnings to the depressed net interest margin and argued that the results were still satisfactory given the bank's loan portfolio structure. 'I don't think we are lagging behind our competitors,' said Mr Wong. 'Every business has its own underlying structure. The only thing we need to do now is to shift our loan portfolio to suit the current economic environment.' Investors began dumping shares of both the group and parent Dah Sing Financial Holdings shortly after the results were announced in the afternoon, with the former falling 1.35 per cent to close at $14.60 and the latter dropping 0.9 per cent to $55 on a rough day for banking stocks. Dah Sing Financial, which derived 89 per cent of its core income from its 78 per cent-owned banking subsidiary, reported earnings growth of 104 per cent to $2.03 billion, due largely to gains from the disposal of Dah Sing Banking shares during the latter's spin-off listing last year. Fulbright Securities general manager Francis Lun Sheung-nim said he expected shares of the group to continue falling for 'a few more days', saying that it was only a natural reaction to a disappointing result.