Lender cuts dividend payout ratio as it plans expansion Fubon Bank (Hong Kong), the locally listed unit of Taiwan's Fubon Financial Holding, reported a 40.9 per cent increase in net profit for last year, in spite of combined write-downs and provisions of more than HK$300 million for subprime-linked securities. However, its dividend payout ratio was lowered as the management said it was reserving more capital for expansion. The bank did not rule out raising funds in the second half, if its expansion plan proceeded on schedule. Net profit rose to a record HK$460.99 million last year, from HK$327.17 million a year earlier, on a 22.5 per cent rise in net interest income and a 32 per cent increase in other operating income, including net fee and commission income. The bank wrote down HK$90.4 million for its US$30 million exposure to collateralised debt obligations. It made impairment charges of HK$162.43 million on notes issued by structured investment vehicles (SIV), about 59 per cent of its portfolio of US$35 million. Fubon also wrote off HK$73.78 million for notes issued by another SIV when it took the high-grade assets of that vehicle into its investment portfolio. Wing Lung Bank and Chong Hing Bank last week disclosed related provisions totalling HK$963.63 million, which largely dragged down their bottom lines. Although, like its peers, Fubon has suffered from its exposure to the subprime crisis, it maintained robust profit growth. Expansion in its core business supported earnings, said executive director and head of financial markets James Yip. The bank also benefited from a net gain of HK$132.47 million on the disposal of equity investments, which offset the substantial provisions. 'Even if further provisions are needed this year, the total amount will probably be limited,' Mr Yip added. 'I think Fubon's provisions last year were sufficient,' said BOCI Research analyst William Wong Kwok-wai. Mr Wong cautioned, however, that further provisions might be needed this year although the amount was likely to be limited. Fubon proposed a final dividend of 13 HK cents per share, bringing the total dividend to 19 Hong Kong cents. Its dividend payout ratio fell to 48.3 per cent from 64.49 per cent a year ago. 'We want to have more flexibility,' said Lee Jin-yi, the bank's managing director and chief executive, saying that the bank would continue to expand, possibly raising funds later in the year. Asked whether the bank had mainland acquisition targets in mind if policies on both sides of the Taiwan Strait permitted, Mr Lee said it would vigorously pursue business in that market without giving up opportunities in Hong Kong.