(22 February 2017 – Hong Kong) Hong Kong-based Hang Seng Bank reported financial results in line with market expectations.
In 2016, net profit fell 41 percent to HK$16.21 billion (A$2.7 billion). The decline would be more moderate, at four percent, if discounting the gains it booked from selling roughly half its stake in Shanghai-listed Industrial Bank to 5.87 percent the previous year.
Non-interest income, which dropped 16 percent year-on-year, was the key drag. It largely reflected a 13 percent revenue decline in the wealth management business, which together with retail banking represented the largest income source for the bank.
A slow Hong Kong market has seen the bank record a 49 percent slump in securities turnover in 2016, leading to a 37 percent drop in fee income from brokerage services.
Unlike many other banks experiencing weak interest income in a low interest rate environment, Hang Seng managed to grow this segment by five percent compared with a year earlier and widened its net interest margin by 2 basis points to 1.85 percent.
This came against the backdrop of extending more loans for use in Hong Kong, by 7percent in 2016, while cutting those outside the territory — largely for mainland use — by 11 percent over the same period.
Overall loan growth was modest, at just 1 percent to HK$699 billion at the end of 2016. “That reflects the demand for loans [to be used in Hong Kong], as well as their quality, since we are selective,” Rose Lee, chief executive of Hang Seng said.
The bank's nonperforming loan ratio ticked down 9 basis points to 0.46 percent between July and December, while loan impairment charges decreased by 18% compared with the first half of the year.