Wing Hang Bank aims to increase return on equity

Wing Hang Bank, a Hong Kong-listed mid-sized lender, aims to boost its return on equity to 20 per cent in three years by expanding its mainland and Macau operations, according to chairman Patrick Fung Yuk-bun.

Mr Fung, who is also Wing Hang's chief executive, said the mainland would be a key market where the bank would put more focus on.

Partly helped by its mainland and Macau businesses, Wing Hang's return on equity increased to 18.9 per cent last year from 17.1 per cent a year ago.

Wing Hang is raising up to US$400 million from the sale of subordinate bonds, and Mr Fung said part of the proceeds would be used to fund its mainland expansion and refill capital after acquiring Inchroy Credit Corp, a car financing firm, in January.

The bank has obtained an initial approval from the China Banking Regulatory Commission to set up a locally incorporated subsidiary in Shenzhen, which he said would be open for business as soon as this quarter.

Mr Fung said the bank would like to have a presence in major mainland cities, but its focus would remain in southern China initially.

It would target high net worth individuals once it gained approval to run yuan-denominated banking services.

Wing Hang planned to open more than 10 branches and sub-branches in Shenzhen and Guangzhou over the next three years, Mr Fung said.

The lender was interested in making equity investment of 10 to 20 per cent in a city commercial bank and had looked at a few of them, Mr Fung said. He said that a price-to-book multiple of 1.5 to two times was reasonable.

Mr Fung expected at least 20 per cent lending growth in the mainland this year, and together with Macau, the two markets could account for 40 per cent of the group's total lendings in five years' time from 27 per cent now.

'The pre-tax [earnings] contribution may account for up to 30 per cent in five years [from about 23 per cent now],' he added.

Wing Hang planned to add 100 staff in the mainland, 40 in Hong Kong and 60 in Macau this year, Mr Fung said.

He said Hong Kong would remain the bank's biggest market, although the growth rate would lag that of the mainland and Macau.

To drive growth in Hong Kong, Wing Hang was centralising all the products from the bank and other units, such as Wing Hang Credit and Wing Hang Finance, in a move to enhance cross-selling.

'I hope the cross-sell ratio can increase by 50 per cent,' he added.