Hang Seng Bank Ltd. (11), the Hong Kong lender majority owned by HSBC Holdings Plc (HSBA), posted a 12 percent profit jump last year as higher lending income offset a slowdown in the city’s demand for borrowing during the second half and said Chief Executive Officer Margaret Leung will retire.
Net income rose to HK$16.7 billion ($2.15 billion), or HK$8.72 a share, from HK$14.9 billion, or HK$7.80, a year earlier, the bank said in a filing to the Hong Kong stock exchange today. That beat the HK$16 billion average estimate of six analysts surveyed by Bloomberg News.
Hong Kong banks expanded their loan portfolios at a slower pace last year after the fastest growth in two decades in 2010, according to the city’s de-facto central bank. Lending slowed from August as European debt crisis concerns damped Hong Kong exports and property transactions and the city narrowly skirted recession in the third quarter.
“Net interest margin will be the key for 2012 and it may shrink,” Ivan Li, deputy head of research at Kim Eng Securities Hong Kong Ltd., said by telephone before today’s earnings announcement. “Competition among banks has started to heat up again as some banks cut mortgage rates recently. Banks are also competing for deposits.”
Net interest income rose 10 percent to HK$15.7 billion while net fee income, derived mostly from selling insurance products and mutual funds, slid 1.2 percent to HK$4.8 billion.
Net Interest Margin
Shares of Hang Seng Bank fell 1.55 percent to HK$101.50 at the 4 p.m. close of Hong Kong trading, before its results were announced. The stock has dropped 19 percent over the past year, lagging behind the 8 percent decline in the Hang Seng Index. (HSI)
Total loans in the city increased 20.2 percent last year, the Hong Kong Monetary Authority said on Jan. 19, compared with a record 28.6 percent growth in 2010 -- the highest rate since 1990. Credit tightening in China has spurred borrowing demand from mainland companies in Hong Kong, soaking up liquidity in the city.
Hang Seng, the second-largest Hong Kong-based lender, said net interest margin last year was unchanged from 2010 at 1.78 percent. That compares with the 1.75 percent net interest margin of rivals Bank of East Asia Ltd. and the 1.39 percent of DBS Bank (Hong Kong) Ltd.
Leung, who will step down in May after 34 years with HSBC Group, said she expects Hang Seng to stabilize or expand its net interest margin this year.
The bank today in a separate statement named Rose Lee to succeed Leung as CEO. Lee, who joined HSBC in 1977, currently holds the title of adviser for China and Hong Kong at HSBC, it said.
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