Money in the bank

Dah Sing Banking Group Limited has posted a 3.85 per cent year-on-year drop in profit before taxation for its Macau operations during the first six months of the year, according to its filing withd the Hong Kong Stock Exchange.
This comes despite a year-on-year increase in operating income in the MSAR for the period, reaching a total of HK$203,689 – 1.9 per cent higher than the first six months of 2015.
‘Our Macau business reported moderately lower profitability, whilst the performance of our Mainland subsidiary, Dah Sing Bank (China), improved,’ noted the business and financial review of the group’s interim results.
The group recorded overall profit for the six-month period of HK$1.07 billion, a year-on-year decrease of 13.9 per cent, noting that performance was ‘adversely affected’ by the weakening economic conditions in global and local economies. In particular, weak retail sales and domestic consumption in Hong Kong, volatility in both equity and currency markets and interest rates that are ‘extremely low’, even rendering negative yield for government bonds ‘in some developed countries,’ are cited by the report.
Net interest for the group improved 11 per cent, reaching HK$1.77 billion; however, the group was faced with sluggish loan growth during the period, also recording drops in fee and commission income of 19.3 per cent when compared to the first six months of 2015, reaching HK$508 million.
The group’s return on assets of 1.1 per cent and return on equity were lower year-on-year due to lower profit, while the cost to income ratio ‘was slightly up’ – from 46.8 per cent to 49.3 per cent ‘due to the reduced income during the period, despite tight cost control,’ notes the filing.
Local sale
The group entered into a sales agreement in June of this year for the disposal of its Macau Life Insurance Company Limited (MLIC) subsidiary and its Hong Kong Dah Sing Life Assurance Company Limited (DSLA) subsidiary to a subsidiary of Fujian Thai Hot Investment Company Limited (Thai Hot). The agreement is subject to ‘certain conditions precedent including regulatory approvals,’ notes the filing.
In addition, the group has announced that the banking subsidiaries of the company, including DSB and Banco Comercial de Macau, ‘propose to enter into new bancassurance distribution agreements for 15 years, with DSLA and MLIC, respectively’.
This will allow for DSLA and MLIC, ‘subject to satisfaction or waiver of the relevant conditions’ to become subsidiaries of Thai Hot on completion of the share sale agreement.
Tough conditions
‘Conditions in the first half of 2016 have generally been difficult,’ notes the filing. ‘These more difficult economic conditions have led to slower loan growth, lower fee and commission income, and higher loan impairment charges. It is unlikely that local economic conditions will rebound strongly in the near future, and therefore business conditions are expected to remain weak in the second half of the year. As the sluggish rate of loan growth continues and is not expected to recover strongly in the second half of the year, this has begun to be reflected in lower loan pricing for certain loan products such as residential mortgages.’
Given the above reasons, the group notes that it will remain cautious during the remainder of the year with regard to credit and overall risk management and will closely manage costs.
The focus for growth is on engagement with customers and will be in line with its July-launched ‘Together we progress and prosper’ theme for the Dah Sing Bank branch.