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Hang Seng Bank (0011) reported a 46 percent decline in first-half net profit to HK$4.7 billion due to a fivefold increase in expected credit losses to HK$2.1 billion mainly from the Chinese property sector.

It declared a second interim dividend of 70 HK cents per share for 2022, 80 cents less year-on-year.

Profit before tax dropped 47 percent to HK$5.4 billion, with its Hong Kong business down 44 percent to HK$5.3 billion. The lender also attributed a 26.5 percent drop to HK$194 million in net insurance fee income resulting from interest rate rises to the net profit slump.

On the loans of HK$66 billion in total to mainland property companies, chief financial officer Andrew Leung said the lender has prepared provisions of over HK$4 billion and will keep a close eye on the possible increase in provisions.

Leung also said the risk that some homebuyers stopped the mortgage repayments to suspended projects in mainland is currently low to Hang Seng Bank, as only one real estate company has stopped construction but repayments for a total of HK$1.4 million continue, with HK$1.3 billion loans for all suspended projects.

He added that the bank now lends money only to projects in tier one cities like Beijing and tier two cities in the Greater Bay Area or those with over 70 percent of possibility in completing construction.

In terms of Hong Kong's interest rate rise, Diana Cesar, executive director and chief executive, said the bank has seen a positive effect on its income and the further increase in interest rate is likely, though the uncertainties from mainland property sector and inflation are still challenging its business growth.

Lender's net dives 46pc on property woes