Industrial Bank listing and wealth management business buoy lender's income Hang Seng Bank's net earnings climbed a better than expected 43 per cent in the first half of the year, boosted by a stake in a mainland lender that went public and gains in its wealth management business. Profit climbed to HK$8.86 billion, helped by a HK$1.46 billion gain from the listing of the mainland's Industrial Bank and growing fee income from wealth management. The lender, a subsidiary of HSBC, beat market expectations for profit growth of about 30 per cent. Analysts said they had anticipated earnings from Industrial Bank's listing but were surprised by the gains in net interest income and wealth management fees. Excluding the gain from Industrial Bank, operating profit rose 22.4 per cent to HK$7.77 billion year on year, the highest growth in 11 years. Wealth management income grew 58.2 per cent year on year to HK$3.42 billion while net interest income rose 20.8 per cent to HK$6.69 billion. However, Hang Seng's mainland operations recorded an unexpected drop in pre-tax profit of HK$40 million. Vice-chairman and chief executive Raymond Or Ching-fai declined to give the mainland profit figure but said it was 'insignificant'. He said the drop in mainland profit was due to set-up costs for a subsidiary, exchange valuation losses on its US dollar capital funds and an increase in bad debt charges for several major corporate loans. The mainland provisions and those in Hong Kong meant total bad debt provisions increased 7.23 times to HK$280 million. The high growth was also due to the absence this year of a write-back of provisions, unlike last year. Mr Or said the profit fall in the mainland would not hurt the bank's strategy of expansion. 'By 2010, we want to see operating profit contributions from the mainland business, including those from Industrial Bank, increasing to 10 per cent of our total, up from about 5.9 per cent now,' he said. 'We also want to spend 4.5 billion yuan to expand our mainland branch network from 19 to 50.' Customer deposits at the end of June rose to HK$558 billion, up 3.4 per cent from a year earlier, while gross advances to customers totalled HK$312 billion, up 11.3 per cent. While the bank has been expanding aggressively its stockbroking business in Hong Kong, it does not plan to follow other brokerages by competing for mainland clients wanting to trade local equities. 'It is still a grey area for local financial entities to help mainland investors trade Hong Kong stocks,' Mr Or said. 'Hang Seng wants to act prudently so that we have not yet developed stockbroking for mainlanders.' Earnings per share were HK$4.64, up 43.2 per cent, while total dividend was HK$2.20 per share, the same as last year.