Lender’s net plunges 46% on housing issues

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Themis Qi

Hang Seng Bank (0011) reported a 46% decline in first-half net profit to HK$4.7 billion due to a five-fold increase in expected credit losses to $2.1 billion of Hong Kong, mainly from the Chinese real estate sector.

It declared a second interim dividend of 70 Hong Kong cents per share for 2022, down 80 cents year-on-year.

Pre-tax profit fell 47% to HK$5.4 billion, with its Hong Kong business down 44% to HK$5.3 billion. The lender also attributed a 26.5% drop to HK$194 million in income net of insurance costs from higher interest rates to the drop in net profit.

Of the HK$66 billion in total lending to mainland property companies, chief financial officer Andrew Leung said the lender had prepared provisions of more than HK$4 billion and would closely monitor the increase. possible provisions.

Leung also said that the risk of some home buyers stopping mortgage repayments for suspended projects on the mainland is currently low for Hang Seng Bank, as only one real estate company has stopped construction, but repayments for a total of 1, HK$4 million continues, with loans of HK$1.3 billion. for all suspended projects.

He added that the bank now only lends money to projects in tier 1 cities like Beijing and tier 2 cities in the Greater Bay Area or those with more than 70% possibility of development. to complete the construction.

Regarding the rise in interest rates in Hong Kong, Diana Cesar, Executive Director and Managing Director, said the bank had seen a positive effect on its earnings and that a further increase in interest rates was likely. , although uncertainties related to the mainland real estate sector and inflation are still challenging the growth of his business.

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