Hang Seng Bank Ltd. (11), the Hong Kong lender controlled by HSBC Holdings Plc, reported record 2013 profit as it booked a one-time accounting gain and wider lending margins offset slowing growth in its mortgage business.
Net income climbed 38 percent to HK$26.7 billion ($3.4 billion), or HK$13.95 a share, from HK$19.3 billion, or HK$10.11, a year earlier, Hang Seng said in a filing to the Hong Kong stock exchange yesterday. The earnings compared with the HK$25.7 billion average of 15 estimates compiled by Bloomberg.
Hang Seng Bank recorded an accounting gain of HK$9.52 billion in the first half after it changed its treatment of a stake in China’s Industrial Bank Co. (601166) The lender’s net interest income and its fee businesses performed better than expected, according to UOB Kay Hian (Hong Kong) Ltd. analyst Edmond Law.
“We expect Hang Seng Bank to continue to do better than its competitors,” Law said by phone yesterday. “The expectation of a sale of the Industrial Bank stake could be a potential catalyst for the stock.”
Shares of Hang Seng Bank, Hong Kong’s second-largest local lender by market value, rose 0.5 percent to close at HK$125 yesterday, before the bank reported results. The benchmark Hang Seng Index fell 0.8 percent.
Net interest income, the difference between what the bank makes from lending and what it pays on deposits, rose 9.8 percent percent to HK$18.6 billion. The average estimate from a Bloomberg survey of eight analysts was for HK$18.4 billion.
Hang Seng’s net interest margin, a measure of lending profitability, gained four basis points to 1.89 percent last year, according to the statement.
Lending climbed 9.3 percent last year to HK$586.2 billion, compared with 12 percent in 2012, Hang Seng said. Residential mortgages, which account for about a fifth of the bank’s total loan book, expanded 4.9 percent, compared with 16.4 percent a year earlier.
Hang Seng operates about 220 outlets in Hong Kong where mortgage loans grew 4.1 percent in 2013, the slowest pace in seven years, data compiled by Bloomberg Industries show.
Home sales dropped 38 percent last year, according to data from the government, which has raised the minimum mortgage down payment six times since 2010. It doubled in February a stamp duty on purchases of more than HK$2 million and imposed an extra 15 percent levy on non-resident buyers.
Net fee income, mainly from services such as credit cards, funds, stockbroking and insurance, rose 15.7 percent to HK$5.9 billion. Income from retail investment funds climbed 37 percent amid improved market sentiment, the lender said. The Hang Seng Index (HSI) jumped 12 percent in the six months through December.
Hang Seng Bank booked a one-time gain of HK$9.52 billion as it reclassified its 10.9 percent stake in Industrial Bank as a financial investment instead of an associate. Excluding the gain, 2013 net income increased 19 percent to HK$17.2 billion from a year earlier, according to the statement.
Operating income from China, which accounted for 4 percent of total operating profit, declined 4.5 percent last year to HK$1.7 billion yuan. The country’s interest-rate liberalization dragged on interest margins, while tighter liquidity intensified competition for deposits, the lender said.
Hang Seng Bank has 48 outlets in Chinese cities from capital Beijing to Guangzhou and Shenzhen in the country’s south.
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