BEA targets record earnings this year
Lender offers an interim dividend of HK$0.38 per share
Bank of East Asia Ltd, the city’s third-largest lender by market value, could achieve record earnings this year if the local economy remains stable in the second half, Chairman and Chief Executive David Li said after the lender reported a 78 percent jump in its net profit for the first half.
The lender’s net profit for the six months ended June 2010 rose to HK$2.08 billion, up from HK$1.17 billion a year earlier.
The surge in profit was driven by strong gains in interest and fee-based incomes, as well as lower impairment losses, which dropped 66 percent to HK$168 million, said the lender.
The bank recommended an interim dividend of HK$0.38 per share, up from the HK$0.28 per share for the same period in 2009.
“If Hong Kong’s economy stays at current (stable) state, we are looking forward to bouncing back to the profitable level of 2007,” Li said during a press briefing for the bank’s interim results Thursday.
The bank earned a record net profit of HK$4.2 billion in 2007. But its net profit plunged over 97 percent to HK$104 million in 2008 after disposing of its entire collateralized debt obligations, which resulted in a HK$3.5 billion write-down.
“Though we are still cautiously optimistic towards the second half of this year, I am expecting another record profit,” said Li.
The lender’s net interest income from its core lending operations rose 14 percent to HK$3.67 billion from a year earlier, thanks to a higher net interest margin and loan growth. Its net interest margin which measures the loan profitability, widened to 1.84 percent from 1.77 percent a year earlier, said Chief Financial Officer William Cheng.
The bank has spent the past three years expanding its operation on the mainland, with mainland outlets growing to more than 70. Li referred to the bank’s mainland business as “a great asset”, which accounted for 45 percent of the group’s profit in 2009.
BEA’s mainland operation recorded a pre-tax profit of HK$780 million in the first half of 2010, up from HK$717 million a year earlier.
The lender’s strong first-half result was also boosted by a gain from the disposal of a 70 percent stake in wholly-owned BEA (Canada) to the Industrial and Commercial Bank of China (ICBC) in January. Net profit would have increased 56.5 percent year-on-year, excluding the one-off gain.
Li said the bank will sell another 10 percent stake in BEA (Canada) to ICBC next year, but denied that the bank is undertaking any merger or acquisition.
“No one has approached me to talk about the buyout of BEA,” said Li, adding that Hong Kong banks’ capital adequacy ratios are higher than the global average, which makes them very expensive to acquire.
Shares of BEA erased morning losses to gain 2.6 percent at the close in Hong Kong Thursday after the earnings announcement. Unlike many of its peers on the Hang Seng Finance Index, which has lost 1.1 percent so far this year, Bank of East Asia has risen by 2.1 percent.
China Daily
(HK Edition 08/13/2010 page3)
http://www.chinadaily.com.cn/hkedition/2010-08/13/content_11147456.htm