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Wednesday, August 3, 2016, 23:21

Major lenders in HK take a hammering

By Duan Ting
Major lenders in HK take a hammering
Pedestrians walk past the Hang Seng Bank headquarters in Central. Experts did not pin high hopes on Hang Seng Bank’s whole year performance, pointing to the strong headwinds from a slowing local economy. (Xaume Olleros / Bloomberg)

Three of the most prominent Hong Kong-listed banks — Hang Seng, HSBC and Standard Chartered (StanChart) — suffered a drastic setback in earnings for the first half of this year on a slew of market turmoil, soft economic data and weak investor confidence.

Hang Seng Bank — a key member of the HSBC Group — on Wednesday posted a 56-percent plunge in profit and a 60-percent tumble in earnings per share in its first-half interim results, compared with the same period last year.

The sheer drop in the bank’s net profit was due to surging bad loans from Chinese mainland borrowers and shrinking income from wealth management sector.

Hammered by the lower-than-estimates result, Hang Seng’s share price plummeted 2.31 percent to close at HK$135.1, while the Hang Seng Index retreated 1.76 percent.

HSBC saw a 28.13-percent fall in interim profit for the first six months of this year to $6.91 billion — down from $9.61 billion for the same period a year ago — while Standard Chartered’s net profit slumped 66 percent to $509 million in the first half of 2016 against the same period last year due to what it called a “challenging environment” in shrinking global markets.

Major lenders in HK take a hammering

Rose Lee Wai-mun, Hang Seng Bank’s vice-chairman and chief executive, said the increase in bad loans had been fueled by the worsening situation of State-owned enterprises since the second half of last year as they struggled to revamp amid a stabilizing mainland economy.

Sam Chi Yung, senior strategist at South China Financial Holdings, did not pin high hopes on the bank’s whole year performance, pointing to the strong headwinds from a slowing local economy. He said the cost-income ratio is expected to rise while the non-interest income and the net interest margin are expected to narrow in the second half of the year.

According to Hang Seng’s report, excluding the HK$10.6-billion windfall gain last year on the partial disposal of the lender’s stakeholding in Industrial Bank, Hang Seng’s core profit was down 15 percent, compared with the same period last year, but grew by 8 percent compared with the second half of 2015.

Net fee income decreased by 27 percent to HK$2.85 billion, driven by lower wealth management business income as investment sentiment weakened under unfavorable market conditions.

Net interest income rose by 5 percent to HK$11 billion, while the net interest margin fell by one basis point to 1.85 percent, and the net interest spread widened by two basis points.

Lee said Hang Seng will continue to improve its competitiveness and cost structure to confront the market uncertainties, adding that the company does not plan to cut headcount for the time being.

The bank declared a second interim dividend of HK$1.1 per share, bringing the total distribution for the first half of 2016 to HK$2.2 per share — the same as in the first half of last year.

tingduan@chinadailyhk.com
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