Bad debts weigh on Hang Seng

Melody Chen

First-half net profit at Hang Seng Bank (0011) inched up less than 1 percent to HK$9.89 billion from a year ago despite lower provisions and higher interest rates.

The bank also lifted its second interim dividend by 9 percent to HK$1.20 per share, bringing the first-half distribution to HK$2.40.

Net interest margins widened by 20 basis points to 2.29 percent as net interest income rose by 2 percent to HK$15.48 billion, up from HK$15.19 billion.

Bad loans hit 5.32 percent due to rising interest rate pressure on commercial real estate borrowers, but collateral levels ensured a stable financial performance.

Its shares slid 5.75 percent yesterday, closing at HK$95.85.

Chief executive Diana Cesar put Hong Kong's economic growth at around 2.8 percent this year amid expectations of one or two rate cuts to ease cash-flow pressures and stimulate economic activity.

Cesar was confident in Hong Kong's outlook, including the property market, and highlighted continued support for the commercial real estate sector, which has proven resilient over many years.

With the impact of rate cuts, the net interest margin for the year is expected to be slightly lower than last year's, says chief financial officer Saw Say Pin.

The HK$3 billion share buyback announced in the second quarter is projected to be completed next month, and the bank will consider all options for returning surplus capital to shareholders, including repurchase and raising dividends.