Bank of East Asia Ltd., Hong Kong’s largest family-run lender, said six-month profit rose 13 percent to a record high, beating analyst estimates of a decline, as lending growth boosted interest income.
Net income for the period ended June 30 increased to HK$3.38 billion ($436 million), or HK$1.43 a share, from HK$2.99 billion, or HK$1.35, a year earlier, the bank said in a statement today. That exceeded the HK$2.78 billion average estimate of five analysts compiled by Bloomberg.
Chief Executive Officer David Li’s expansion in China, where Bank of East Asia is the country’s second-largest foreign bank by number of branches after HSBC Holdings Plc., contributed to a 9.3 percent jump in lending in the period. Shares of the bank jumped as much as 3.8 percent after the earnings were announced, closing at a two-month high.
“The surprise of the earnings mainly comes from better than expected interest income driven by faster loan growth, particularly in China,” Grace Wu, an analyst at Daiwa Capital Markets Hong Kong Ltd., said by phone today. “Loans grew faster than deposits, which also contributed to the better-than-expected net interest income growth.”
First-half lending climbed to HK$383.2 billion, accelerating from a 2.7 percent rate a year earlier, the lender said in the statement. The group’s net interest margin widened to 1.83 percent, from 1.7 percent in the second half last year.
The stock rose 1.2 percent to close at HK$29.45 in Hong Kong. The benchmark Hang Seng index rose less than 1 percent.
Bank of East Asia’s first-half lending in China jumped 16 percent, faster than the 4.6 percent expansion of Hong Kong lending. Mainland operations reported a 1.6 percent decline in pretax profit as loan impairment losses jumped 85 percent and operating expenses rose 15 percent, according to the statement.
The impaired loan ratio at the China unit jumped to 0.43 percent at the end of June from 0.27 percent at the end of last year, according to the statement. The ratio could surge to more than 1 percent in a “very stressed” scenario, Deputy Chief Executive Brian Li said in a press conference today.
Bad loans at the lender’s China operations were mainly concentrated in small and medium-sized enterprises in Zhejiang and Fujian provinces, Li said.
The bank’s net interest income jumped 23 percent, while net fee and commission income from operations such as credit cards and trust services climbed 19 percent to HK$1.98 billion.