BOC Hong Kong (holdings) The drive by BOC Hong Kong (Holdings) to clean up its loan book continues to produce mixed results after a core earnings drop last year met most analysts' expectations. A key factor behind last year's performance was sluggish loan growth. While many of the bank's competitors have shown healthy increases driven by a recovering property market and improved consumer sentiment last year, loans to customers of BOCHK grew only 1.5 per cent to $313.22 billion. According to the bank, the underperformance is a reflection of an active strategy to change the risk profile of loans, which resulted in a drop in the non-performing loan ratio to 2.95 per cent from 5.78 per cent a year ago. Tied to a 4 per cent expansion in the bank's performing loan portfolio, the group reported 50.2 per cent earnings growth to $11.96 billion due to a large provision write-back and a recovering property market that boosted gains from revaluation of its premises and investment properties. Discounting the two factors, which include a reversal from a $1.67 billion bad debt charge in 2003 to a $1.62 billion write-back and a $3.52 billion gain in property revaluation, the company would have recorded a 10 per cent drop in operating profit to $10.35 billion. Revaluation gains on such a level are unlikely to be repeated in the future. Meanwhile, net interest income has dropped more than 13 per cent to $11.19 billion, the result of narrowing interest margins. However, stagnating non-interest income grew only 6 per cent to $4.66 billion and accounted for 29 per cent of operating income.