Wing Hang Bank's ~US$230m FY12 profit disappoints analysts

Margin was also disappointing at 1.62%.

According to Barclays, Wing Hang Bank reported FY12 net profit of HK$1.8bn (~US$230m), -13% y/y, 4-5% below their/Bloomberg consensus.

Weakness was seen across net interest income, fee income (lower trade and stockbroking fees), rise in cost/income ratio, and sharp asset quality deterioration in China business (although from a low base), although was partially offset by gains on investment and property revaluation/disposals.

Here's more from Barclays:

Margin disappointing - Margins fell by 7bps y/y to 1.62% (down 10bps h/h in 2H), affected by an “increase in deposit funding costs” and a “decline in interbank rate” in China.

We had expected Wing Hang to benefit from lower HK$ funding costs. Loans only rose by 4% in 2H driven by mortgage and property investment loans. Trade finance contracted further by 12% h/h due to a slowdown of letter-of-credit financing.

Asset quality deteriorated sharply in China (although from a very low base). China’s NPL ratio rose from 0.2% to 1.7%, resulting in total NPL ratio more than doubling to 0.45%. We await comments from management on asset quality outlook.

Dividend payout ratio rose – A final dividend of HK$1.62/sh was declared (full year dividend of HK$2.08, +16% y/y), resulting in the dividend payout ratio rising to 35% (from 25%). Core Tier 1 ratio declined slightly to 10% (from 10.1% in 2011).