Tighter lid on costs lifts BEA shares

Finance | Daisy Wu and agencies 16 Feb 2016

The share price of Bank of East Asia (0023) rose by 2.44 percent to HK$23.10 despite posting a 17.1 percent year-on-year drop in net profit to HK$5.52 billion last year, dragged down by its mainland operations.

Chairman and chief executive David Li Kwok-po said BEA will freeze headcount across the group and merge some of its sub-branches in the mainland as it does not expect any "material improvement" in its business environment.

His son and deputy chief executive, Adrian Li Man-kiu, said a board meeting in April will decide whether a pay freeze is to be adopted or not.

The dividend for the year fell 20.7 percent to 88 HK cents, representing a payout ratio of 46 percent. Basic earnings per share slumped 28.3 percent to HK$1.95.

Net interest income fell 5.8 percent to HK$11.93 billion as net interest margin at BEA China narrowed to 1.82 percent from 2.2 percent.

The contraction came after China's central bank reduced interest rates and as BEA employed a more conservative lending approach.

Impairment losses on loans and advances surged 106.4 percent to HK$2.04 billion as BEA China's nonperforming loan ratio surged to 2.63 percent at the end of the year.

That compares with the 1.59-percent average for Chinese lenders in September.

"The worst is not over [yet]," said another son of David Li and deputy chief executive Brian Li Man-bun.

David Li said the family will not sell the bank and will do better to "fight back" hedge-fund firm Elliott Management, which is pushing for a sale and has accused its executives of serially mismanaging the business. Elliott Management owns a 7 percent stake.

But the bank and NWS Holdings (0659) did yesterday say they are considering a sale of Tricor Holdings.

BEA holds 76 percent of Tricor, which provides business and investor services, while the rest is owned by NWS.



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