Bank of East Asia profit nearly halved at HK$3.2b on China impairment losses

Small and medium business lender Bank of East Asia (0023) reported today profit for 2019 dropped by 49.9 percent from the year before to HK$3.26 billion.

This representing a decline of HK$3.24 billion from HK$6.50 billion earned in 2018.

Operating profit before provisions grew by 15.1 percent year-on-year.

The profit drop was attributed to a significant increase in impairment losses in mainland China.

The net charge of impairment losses on financial assets for the group increased from HK$1.18 billion in 2018 to HK$7.25 billion in 2019, mainly due to higher impairment losses recorded by mainland China operations.

The group’s impaired loan ratio increased from 0.70 percent at the end of 2018 to 1.22 percent at the end of 2019.

The impaired loan ratio for Hong Kong operations improved from 0.29 percent to 0.25 percent, while that for mainland China operations grew from 1.73 percent to 3.80 percent.

Operating profit after impairment losses was HK$2.54 billion, a drop of HK$4.37 billion, or 63.3 percent.

The basic earnings per share were HK$0.89, compared with HK$2.07 in 2018.

Return on average assets and return on average equity were 0.3 percent and 2.7 percent, respectively, in 2019, compared with 0.7 percent and 6.3 percent, respectively, in 2018, BEA reported.

Net interest income increased by HK$1.54 billion, or 11.9 percent, to HK$14.50 billion. Net interest margin increased from 1.73 percent to 1.85 percent and average interest-bearing assets grew by 4.9 percent.

Net fee and commission income was up by HK$288 million, or 10.8 percent, to HK$2.94 billion.

This was largely due to higher commission income from credit cards and sales of third-party insurance policies. It was partially offset by a decline in commission income from securities and brokerage.

BEA declared a second interim dividend for the year ended December, 31, 2019 of HK$0.35 per share. Together with the 2019 interim dividend of HK$0.11 per share paid in October 2019, this will make up a total dividend of HK$0.46 per share for the full year, the bank said.

Total operating expenses increasd by 15.5 percent to HK$9.89 billion. This was mainly due to an increase in internet platform charges incurred for retail co-lending business in mainland China.

Excluding such internet platform charges, total operating expenses was up by 7.1 percent.

The cost-to-income ratio remained flat at 50.2 percent in 2019, BEA said.

Pre-provision operating profit stood at HK$9.79 billion, an increase of HK$1.28 billion, or 15.1 percent, compared with 2018.

Additional Tier 1 capital increased to HK$13.96 billion, up by 57 percent. Loan capital fell by 17.2 percent to HK$10.23 billion, BEA reported.