Hedge Fund Heroes May Lose at BEA

Bank of East Asia investors are treading on thin ice. The last big independent Hong Kong bank refuses to be sold, even as its operating performance is slowly crushed. Shareholders face whiplash if Elliott Management, the activist firm urging the founding Li family to cede control, aborts its mission.

BEA, the foreign lender with the most branches in China after HSBC, posted first-half earnings last week that showed the vulnerability of that country focus. Net profit fell 38 percent from a year earlier to HK$2.1 billion ($271 million), the fourth consecutive half-yearly decline, while return on equity slumped to a paltry 4.8 percent, compared with an average of about 13 percent for its peers, mainly in China, according to data compiled by Bloomberg. Bad loans in a slowing economy are partly to blame, though even elsewhere, the lender struggled to make money: