(Updates with management comments starting in sixth paragraph.)
Feb. 26 (Bloomberg) -- Bank of East Asia Ltd., Hong Kong’s largest family-run lender, said 2012 profit jumped 39 percent as trading income climbed, helping offset a decline in profit from the mainland China business.
Net income rose to HK$6.06 billion ($781 million), or HK$2.72 a share, from HK$4.36 billion, or HK$1.96, a year earlier, the bank said in a filing to the Hong Kong stock exchange today. That exceeds the HK$4.91 billion average estimate of 24 analysts surveyed by Bloomberg News.
Trading income and profit from securities holdings jumped as Hong Kong’s benchmark Hang Seng stock index rose 23 percent last year, compared with a 20 percent decline in 2011. Pretax profit from mainland China operations, which grew by an average 31 percent in 2010 and 2011, declined last year as the economy slowed for the first three quarters before a rebound.
“The trading gain and better-than-expected margin improvement helped deliver the strong results,” Grace Wu, an analyst at Daiwa Capital Markets Hong Kong Ltd., said by telephone. “Trading income is dependent on the market situation, it’s difficult to tell if it will be sustained through 2013.”
Shares in the bank rose 1.1 percent to HK$31.25, their biggest increase since Feb. 6, extending their year-to-date gain to 5.4 percent.
The group’s net interest margin, a measure of lending profitability, widened 7 basis points in the second half to 1.7 percent, according to a press release. The margin at the bank’s Hong Kong operations expanded 24 basis points in the last six months of the year as it raised lending rates and held higher- yielding assets, Deputy Chief Executive Officer Adrian Li told reporters. That offset a contraction at the mainland unit.
Pretax income from mainland China declined to HK$2.25 billion last year from a restated HK$2.37 billion a year earlier because of narrowing margins, Brian Li, deputy chief executive for China and international business, told reporters. The net interest margin at the unit shrank 35 basis points last year to 2.15 percent.
Lending profitability may improve this year in both the Hong Kong and China operations on lower funding costs and repricing of loans, the deputy CEOs said. Loan volume in Hong Kong may grow by less than 10 percent while the growth in China may be in the low double digits, they said.
The third-largest Hong Kong-based lender booked a trading profit of HK$765 million in 2012, up from HK$175 million a year earlier. It also posted a gain on financial instruments of HK$664 million, improving from a loss of HK$354 million the previous year.
Net interest income rose 5 percent to HK$9.72 billion while net fee and commission income grew 11 percent to HK$3.38 billion.
--With assistance from Nathaniel Espino in Beijing. Editors: Nathaniel Espino, Russell Ward