Bank of East Asia Ltd., Hong Kong’s largest family-run lender, unexpectedly reported higher 2013 profit as wider lending margins helped offset a drop in trading income. The stock surged the most in five months.
Net income increased 9 percent to a record HK$6.61 billion ($852 million), or HK$2.78 a share, from HK$6.06 billion, or HK$2.72 a share, a year earlier, the bank said in a filing to the Hong Kong stock exchange today. That exceeded the HK$5.89 billion average of 21 analyst estimates compiled by Bloomberg.
The Hong Kong lender stepped up its expansion in China as the nation embarked on its broadest economic reform measures since the 1990s. Bank of East Asia said efforts to bolster its product range in China helped the lender improve interest margins as the Chinese central bank liberalizes interest rates.
“It’s a very strong set of results,” Grace Wu, Hong Kong-based analyst at Daiwa Securities Co., said by telephone. “We are quite encouraged to see that very strong growth in net interest income, which has more than offset the weaker trading profit.”
Net interest income increased 25 percent to HK$12.2 billion last year, helped by a widening of the net interest margin, according to today’s earnings release, which didn’t provide the NIM figure. Loans to borrowers in China grew 13 percent in 2013 to HK$144.2 billion.
The company’s net interest margin expanded by 15 basis points to 1.98 percent in the second half of 2013 from the previous six months, while its China business had a 35 basis point gain to 2.46 percent, Sharnie Wong and Chen Wang, Hong Kong-based analysts at Barclays Plc, wrote in a report today.
Bank of East Asia shares rose 3 percent, the most since Sept. 17, to HK$31.35 at the close in Hong Kong. The stock jumped as much as 5.4 percent after the earnings, which were reported during the midday trading break. The shares lost 0.8 percent in the past 12 months, compared with a 3.4 percent drop by the benchmark Hang Seng Index.
Bank of East Asia has more than 120 outlets in China, which accounted for 40 percent of the lender’s 2013 operating income, according to data on its website and today’s statement.
The bank devoted more resources to expanding its China business including setting up a team for supply-chain financing and developing more high-yielding retail loans such as auto loans and micro-financing last year, it said today.
“Mainland China has been and will remain a key focus,” Chief Executive Officer David Li wrote in the earnings report. “We will further strengthen collaboration among our branch networks in Hong Kong, mainland China and overseas to capture opportunities arising from increasing business flows to and from the mainland.”
The weaker performance of Bank of East Asia’s investment portfolio and lower trading income contributed to a 5.6 percent drop in non-interest income last year, the bank said.
The average daily value of securities traded on the Hong Kong stock exchange’s Main Board dropped to HK$56.7 billion in the second half of 2013 from HK$68 billion in the first six months, data compiled by Bloomberg show.