Thailand Financial News

Fitch Ratings has affirmed Hang Seng Bank’s (HSB) Individual Rating at ‘A/B’ and Support Rating at ‘1′. HSB’s ratings reflect its very good financial performance and standing. HSB continued to post strong profitability in 2006 with a return on average assets (RoAA) of 2.0%, thanks to strong interest margins, a sound level of non-interest income, negligible credit costs, and low tax charges.

Fitch expects the bank to maintain its margins and fee income, although costs could rise as the bank invests in its expansion in China. Credit costs are also likely to rise to a more normal level from the very low levels of the past couple of years. Net profitability, however, should remain very good. HSB’s loans grew moderately at 7% in 2006, with strong loan growth in China outpacing slower growth in Hong Kong. Loan quality was excellent, with impaired loans at just 0.5% of total loans and 67% covered by allowances at end-2006. Capitalisation was also substantial with Tier 1 and total capital adequacy ratios (CARs) at 10.7% and 13.6% respectively. HSB plans to generate 10% of its revenues from China by 2010, with an ongoing focus on supporting the investments of its existing Hong Kong customers. Towards this end, it has established a banking subsidiary in China and plans to triple its network there to 50 branches by 2010. The bank is also looking to expand into insurance services on the mainland, where HSB has acquired a 12.8% stake in China’s mid-sized Industrial Bank Co., Ltd in 2004 (rated ‘D/E’ by Fitch). Established in 1933, HSB had to be rescued by the HSBC group in 1962 - hence the 62% ownership (the bank is listed so the rest of the shareholdings are held by the public). In the last forty-five years, HSB has emerged to become one of the leading banks in Hong Kong, with a solid franchise built on a reputation for superior service. — www.theasianbanker.com (June 29 2007)–