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Friday, February 17, 2017, 17:55

BEA profit dips 32% on woe of asset quality deterioration

By Oswald Chan
BEA profit dips 32% on woe of asset quality deterioration
Pedestrians cross an intersection in front of a Bank of East Asia Ltd. (BEA) branch in Hong Kong, Feb 12, 2015. (Bloomberg / Jerome Favre)

Bank of East Asia Group (BEA Group), the city’s largest independent bank established in 1918, registered a 32.6 percent plunge in profit attributable to owners of the parent to HK$3.72 billion for the year ended December 31, 2016, citing asset quality deterioration due to the weak market conditions in Hong Kong and Chinese mainland.

Basic earnings per share was HK$1.21 and the lender declared the second interim dividend of HK$0.28 per share. This brought the dividend for the year to HK$0.56 per share that made the dividend payout ratio to remain at 46.7 percent which was on par with last year.

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"Our lending business to mainland small and medium enterprises in areas of manufacturing, wholesale and retail trade has suffered tremendously in the last two years,” cautioned Brain Li Man-bun, deputy chief executive at BEA Group.

The group’s decline in profit before tax was mainly attributed by increased impairment losses affected by mainland’s asset quality due to mainland economic slowdown and renminbi volatility, a 7 percent decrease of net interest income, as well as a 10.7 percent dip in net fee and commission income.

The group’s provisions for non-performing loans rose by 70.4 percent to HK$3.46 billion while the lender’s net interest margin decreased from 1.66 percent to 1.6 percent.

"We are cautiously optimistic that loan demand will improve in most markets in 2017 even as US interest rate rise and that the credit cycle has bottomed out,” BEA Group Chairman and Chief Executive David Li Kwok-po said in the Friday press conference.

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"We expect asset quality to stabilize in the coming year and we will enter 2017 with a healthier balance sheet,” he added.

Looking forward, BEA Group will continue to tighten credit guidelines and reduce loan exposure in mainland’s stressed sectors to clean the bank’s balance sheet.

It will also proactively to cut cost. The lender said its three-year cost-saving plan targeting HK$700 million in gross savings-achieved 40 percent of the target sum in 2016. The bank will also continue to invest in digital initiatives to streamline operation and enhance efficiency.

BEA Group share price dived 4.1 percent to close at HK$33.1 per share in Friday trading.

oswald@chinadailyhk.com

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