Hong Kong's Bank of East Asia reports 2016 profit at 7-year low

[HONG KONG] Bank of East Asia Ltd (BEA) has reported a 33 per cent fall in annual profit to its lowest in seven years, in line with estimates, due to slowing loan demand in its main markets of Hong Kong and China as well as a rise in bad loans.

Profit fell to HK$3.72 billion (S$681.3 million) in 2016, the bank said in a statement on Friday, meeting the HK$3.7 billion average of 10 analyst estimates in a Thomson Reuters poll.

Its impaired loan ratio rose to 1.49 per cent as at the end of 2016 from 1.13 per cent a year earlier. Loans to customers in mainland China fell 7.1 per cent to HK$139 billion as at December-end.

"We are cautiously optimistic that loan demand will improve in most markets in 2017... Higher interest rates should benefit our business in Hong Kong, where we are a net lender to the Interbank market," chairman David Li said in the statement. "Barring unforeseen events, we expect asset quality to stabilise in the coming year."

BEA, like several other financial firms, has been hit by regulatory challenges and economic slowdown in China and Hong Kong. But unlike other Hong Kong family-owned banks, deteriorating market conditions have not forced its sale.

It has, however, faced pressure from activist shareholder Elliott Management which has been pressing for a sale and which sued the bank last year over a share placement.

In October, BEA agreed to sell share registry subsidiary Tricor Holdings to private equity firm Permira for HK$6.5 billion, a deal seen as bolstering its capital reserves.

That was the first major sale of any business by the bank, whose offerings include corporate and retail banking, wealth management and investment services.

REUTERS