Hang Seng Bank attributable profit drops 46% YoY to HK$4.7b in H1 2022
External factors such as the fifth wave of the pandemic affected the financial result.
Hang Seng Bank posted a 46% year-on-year (YoY) decline in attributable profit to HK$4.7b due to effects brought by the “difficult external environment,” such as the fifth wave of the pandemic, amongst other factors.
In a statement, Diana Cesar, executive director and chief executive, said a significant drop was recorded in insurance income because of the adverse impact of market movements on life insurance investment portfolio.
She said this was worsened by the unfavourable discounting impact of interest rate rises, leading to a 28% decline in operating profit before expected credit losses.
Cesar said that notable adjustments were made to the company’s expected credit losses as there is “greater refinancing risk” in the mainland commercial real estate market.
“The combined impact of these two factors led to a reduction of 46% in attributable profit,” Cesar said.
“Nonetheless, our agile business structure has enabled us to respond effectively to changing customer needs in fast-moving market conditions. We are seeing improved growth in areas such as trade loans, personal lending, turnover of various fixed-term instruments and foreign exchange business when compared with the second half of 2021,” she added.
Hang Seng Bank’s net operating income before change in expected credit losses and other credit impairment charges declined 14% YoY to HK$14.9b, whilst the operating profit was down 46% to HK$5.5b.
The bank added that the Group’s net interest income benefitted from the increasing trend of interest rates during the first half, increasing by 4% to around HK$12.4b. This was due to the rise in average customer loans and interbank placings, along with the improved net interest margins.
It said that the growth in this area is a reflection of the bank’s efforts to strengthen its asset and liability management, and “maintaining a balanced growth strategy to sustainable expand average loans and deposits.
Cesar said that key economic and market indicators show that the operating environment will still be challenging for the rest of the year and the company will keep a close eye on external risks such as developments in the mainland commercial real estate sector, inflation, and rising commodity prices and the pandemic.
“On a positive note, the upward trend in market interest rates is shoring up the net interest margin and we are starting to see the positive effects in our interest-earning activities. We look forward to a resumption in cross-boundary movements to further stimulate economic and social activities,” she said.