UPDATE: Hang Seng Bank 1st-Half Net Up 8.4% On Higher Fees

2nd Aug 2010 13:04

(Adds details on net fee income, net interest margin and comments from bank's management about second-half outlook.) By Chester Yung Of DOW JONES NEWSWIRES HONG KONG (Dow Jones)--Blue-chip lender Hang Seng Bank Ltd. (0011.HK) said Monday its first-half net profit rose 8.4% from a year earlier, as higher fee income and loan growth more than offset a decline in net interest income. Hang Seng Bank Chief Executive Margaret Leung said the lender, which is 62%-owned by U.K. banking giant HSBC Holdings PLC (HBC), expects interest rates to remain low this year, so it will shift its focus to boosting non-interest income from businesses such as wealth management rather than depending on its core lending business. She also said the bank sees opportunities to increase its yuan business this year. Hong Kong's low interest rate environment, fueled by the ample liquidity and historically low interest rates in the U.S., has led to fierce competition to issue new loans among the city's banks. Hong Kong effectively imports its monetary policy from the U.S. because of the Hong Kong dollar's peg to the U.S. dollar. Hang Seng Bank, which has more than 220 outlets in Hong Kong, said its net profit for the six months ended June 30 was HK$7.00 billion (US$901 million), up from HK$6.43 billion a year earlier. The figure was slightly above the average HK$6.85 billion forecast of three analysts. The higher net profit was largely because its net fees and commissions rose 23% to HK$2.37 billion from HK$1.93 billion a year earlier due to the increased sales of investment products amid improving market sentiment. Net interest income from its core lending business fell 7.7% to HK$6.71 billion from HK$7.28 billion due to the low interest rates. The lender's net interest margin for the first half dropped to 1.93% from 1.94% at the end of 2009. "The (global) recovery remains fragile, particularly in the major advanced economies that are Asia's key export markets, clouding the outlook for Hong Kong's externally orientated economy for the rest of the year," Leung said. However, the recent expansion of the program under which cross-border trades can be settled in yuan will offer new business opportunities to the bank, she said. China and Hong Kong signed an agreement on July 19 to expand yuan business in Hong Kong, which will give Hong Kong's financial institutions more room to offer yuan-denominated investment products. Hang Seng Bank declared a first-half dividend of HK$2.20, unchanged from a year earlier. -By Chester Yung, Dow Jones Newswires; 852-2832 2331; [email protected] (END) Dow Jones Newswires August 02, 2010 08:04 ET (12:04 GMT)