Citic International Financial Holdings suffered an operating loss of HK$24.86 million last year after its Hong Kong banking arm Citic Ka Wah Bank was hit by a subprime-related write-down of HK$1.31 billion. However, the group's net profit still rose 64.49 per cent to HK$1.85 billion, thanks to earnings contribution of more than HK$1.6 billion from 15 per cent-owned China Citic Bank Corp and other associates. Citic Ka Wah's net profit plunged 88.41 per cent to HK$106 million last year, mainly due to its substantial net losses and write-downs on four structured investment vehicles. 'We may have to write down a further HK$705 million in 2008 [for the two remaining SIVs],' group managing director Doreen Chan Hui Dor-lam said. The net asset value of the two SIVs had dropped to 1.6 per cent and negative 0.53 per cent respectively as of earlier this month. The bank began to unwind its fund investments portfolio, reducing its size by 48 per cent to HK$1.6 billion at the end of last year. 'We have to revisit our fund investment model as the market has changed,' Mrs Chan said, adding that there would not be any loss as the redemption of all the hedge funds would be completed by June. Terry Sham, an associate director at Standard & Poor's Ratings, expected further SIV-related write-downs at Citic International this year. However, Mr Sham also said he believed the group 'will continue to benefit from core earnings of Citic Ka Wah and Citic Bank in 2008'. Another analyst said the group's operating profit was expected to return to positive this year but not to normal levels as it would need to make further provisions. Last year, the bank's wholesale and retail banking businesses delivered strong growth momentum, with net interest income rising 31.9 per cent and net fee and commission income increasing 48 per cent. 'We are confident that our business will develop better in 2008 despite the impact of SIVs,' chief executive Dou Jianzhong said. Despite global uncertainties, Mr Dou was counting on strong economic growth on the mainland to deliver opportunities. He said negotiations on Citic Ka Wah acquiring assets of Banco Bilbao Vizcaya Argentaria were nearing completion. The deal is aimed at transforming Citic Ka Wah into a banking platform for the group's business development in Asia. No dividend would be paid for last year as the group needed to reserve earnings for expansion, Mr Dou said. But he added he hoped to resume dividend payouts for this year. Shares of Citic International yesterday rose 4.32 per cent to close at HK$3.62.