Earnings slide despite 5.9pc growth in loans

Wing Lung Bank profit dropped 36.1 per cent last year but bucked the industry trend by recording positive loan growth.

Attributable profit was $600.04 million for the year to December, in line with expectations but down from the previous $1.11 billion.

Provisions for bad and doubtful debts rose 533.4 per cent to $357.33 million.

Wing Lung recorded a 5.9 per cent growth in loans to $29.9 billion, mainly driven by increases in residential mortgages.

Executive director Chung Che-sum said deterioration in the economy had reduced opportunities for the bank to increase its assets and raised the need for more provisions to counter potential defaults in the commercial sector.

Non-performing loans (NPLs) - on which interest has been suspended or on which interest accrual has ceased - rose 74.6 times to $756.23 million or 2.53 per cent of its total loans, from the previous low base of $10 million. This ratio compares with 3.9 per cent for Hang Seng Bank and 5.2 per cent for Hongkong Bank.

Wing Lung declined to reveal the extent of its exposure to collapsed Guangdong International Trust and Investment Corp, but said it had made a 100 per cent provision for this exposure and an across-the-board 20 per cent provisions for loans to other mainland corporations.

Its exposure to the Itic sector comprised 0.6 per cent of its loan book and non-Itic mainland-related loans made up another 5.9 per cent.

About 80 per cent of NPLs were covered by collateral and specific provisions.

Affected by volatility in interbank rates last year, the bank's net interest income dropped 2.1 per cent to $1.15 billion.

Non-interest income slid 7.2 per cent to $404.02 million due to slower loan growth which affected loan fee revenue.

Operating expenses increased by a marginal 2.1 per cent to $474.78 million.

Chairman Michael Wu Po-ko said the bank would continue to streamline operations amid a difficult environment but would not implement any large-scale staff redundancy programmes.

The bank's tri-annual revaluation exercise for all investment property generated a $605 million deficit, which had been charged against property revaluation reserves.

The move, combined with the addition of last year's retained profit, resulted in a 4.2 per cent decline in shareholders' funds to $5.5 billion and a 0.1 percentage point reduction in the bank's capital-adequacy ratio to 17.6 per cent.

Earnings per share were $2.58, down from the previous $4.04.

Dividend per share for the year was $1.02, down from $1.60 a year ago.

FEELING PINCH Attributable profit at $600m from $1.1b Provisions climb 533pc to $357m Loans buck trend with 5.9pc increase Dividend at $1.02