Monday, October 21, 2019
 
Columnist
Martin Hennecke

BEA warns over loan downgrades
 
14/06/2019
 
<p>Bank of East Asia (0023) issued a rare profit warning yesterday and expects to record a decrease in profit for the first half of this year, compared with a net profit of HK$3.99 billion for the first six months in 2018, due to an expected downgrade of four legacy loan assets in mainland China as market conditions deteriorate.</p><p>The bank, which was taken off the blue-chip Hang Seng Index last year, said the downgrade of four legacy loan assets, with a nominal value of about HK$6.2 billion, were due to worsening market conditions, which have affected the commercial property sector in non-tier-1 cities.</p><p>It estimated a post-tax impairment loss of HK$2.5 billion to HK$3 billion because of the downgrade.</p><p>Deputy chief executive Adrian David Li Man-kiu, who will be appointed co-chief executive after his father, David Li Kwok-po, steps down on July 1, said the bank will still record a net profit, and it would not see any one-off provision in the second half.</p><p>He also said the profit warning will not affect the bank&#39;s dividend policy.</p><p>The bank expects its common equity tier 1 to remain above 14.5 percent and total capital adequacy ratio above 19 percent as of June 30, which are well above the regulatory requirements.</p><p>It says its liquidity position and core banking operations continue to be strong and expects healthy growth in pre-provision operating profit.</p><p>Brian David Li Man-bun, another co-chief executive-elect, said the commercial property loan in non-tier-1 cities accounted for only 2 percent of the total loans of the company.</p><p>The pre-provision operating profit of mainland business will record steady growth.</p><p>He expressed confidence over long-term prospects for the mainland economy, saying the bank will continue to optimize the structure of its loan portfolio, strictly control business development and continue to expand its retail business.</p><p>When asked about Hong Kong&#39;s extradition law protests, Adrian Li said the quality of its Hong Kong assets remains healthy, but he declined to comment on the current political situation.</p>

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