Loan impairment charges and higher costs related to the Lehman Brothers minibonds slashed Dah Sing Banking Group interim net earnings by 40.61 per cent. The bank posted net first-half profit of HK$306.85 million, down from HK$516.7 million a year earlier. Loan impairment charges rose 116.15 per cent to HK$272.49 million, mainly due to higher commercial banking and equipment finance loan losses. Managing director Derek Wong Hong-hing said the bank also set aside money for potential resettlement of the minibonds but added that it was unsure how many customers would accept the offer. 'It is unlikely that we will have to make a substantial provision [for the minibonds] in the second half [of this year] and next year,' Mr Wong said. Sixteen banks sealed a deal with regulators last month to settle claims with investors over the Lehman minibond saga. Dah Sing estimated the cost of its minibond buy-back at HK$444 million. The bank posted a HK$17.68 million operating loss, but that was offset by a one-off gain of HK$243.98 million after buying back subordinated debt at a discount. Mr Wong said the bank also made a further write-down of HK$142 million on its exposure to structured investment vehicles, which had fallen to HK$5 million by June 30. Operating expenses rose 41.36 per cent to HK$963.88 million, partly reflecting provisions for the potential settlement of the minibonds. Mr Wong said asset quality was stabilising and he hoped this would continue in the second half. Ivan Li, an analyst at Kim Eng Securities, said he was disappointed by the bank's core business performance, with net interest margin narrowing to 1.98 per cent from 2.24 per cent a year earlier. Dah Sing and its parent company, Dah Sing Financial Holdings, did not declare an interim dividend. Mr Wong said the bank would resume dividend payments when the economy recovered and business returned to normal. Earnings at Dah Sing Financial fell 20.38 per cent to HK$300.9 million due to the banking arm's weak performance. The group's insurance business returned to profit from a loss previously.