Net profit for FY11 was HK$4.36b.
Kim Eng noted:
FY11 net profit was HK$4.36b, up 3% yoy. This is in line with market consensus, though slightly lower than our estimates. Earnings quality appears satisfactory. There were some non-operating items, but of a lower magnitude than last year.
BEA incurred trading and revaluation losses in 2H11. “Other non-interest income” was HK$110m, down 83% yoy. This is mainly due to trading and revaluation losses on financial instruments in 2H11.
Asset quality seems to have held up better than expected. Loan loss provisions fell by 74% yoy, better than expected. NPLs amounted to HK$1.48b at end-Dec 2011, up just 6% hoh and down 7% yoy.
China operations seem better than expected. Net profit from operations in China was HK$1.8b, up 60% yoy and contributing 42% of group net profit. NIMs in BEA’s China business rose by 16bps yoy, while China net interest income rose by 43% yoy.
CAR is still a concern. As at end-Dec 2011, core and total CAR were 9.4% and 13.7% respectively, slightly better than expected. This is, however, still not enough to ease investor concerns of a potential equity raising. We expect BEA to raise equity capital sometime in the next 12 months. 2H11 loan growth was only 2%; we believe this is related to BEA’s weak CAR.
BEA’s ROE remains low. FY11 ROE was 9.5%, and we expect ROEs to remain in single digits in FY12/13. Although BEA’s ROEs are lower than most of the HK/China banks, it trades at higher PER and P/BV valuations, which does not appear justified.
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