Hang Seng Bank's profits rose 23% YoY to $2.56b

Net interest income also increased thanks to a steady loan pipeline.

Hang Seng Bank’s smashed forecasts and consensus estimates after reporting above-target net profits which rose 23% YoY to $2.56b (HKD20b) in 2017, according to UOB Kay Hian.

Net interest income also hit $3.14b (HKD24.58b) over the same period thanks to double-digit loan growth of 15% buoyed by a steady stream of corporate and commercial lending, mortgage loans, and infrastructure, technology and environment-related loans.

Overall asset quality also improved on the back of lower NPL ratio which dipped to 0.24% whilst NPL balances plunged 37% to $251.77m (HKD1.97b) in 2017.

Moving forward, UOB remains bullish about HSB’s growth prospects for the year ahead as net profit forecasts for 2018 and 2019 are respectively set at a healthy 6.7% and 12.4% due to higher loan growth estimates.

“We believe HSB’s overall growth is faster than our previous expectation. Besides strong loan demand in Hong Kong, we expect stronger development in its China business going forward. In addition, we think the dividend yield may look attractive to investors under current volatile market conditions,” the report added.

Here’s more from UOB Kay Hian:

NIM remained unchanged hoh at 1.94% in 2H17. The bank enhanced deposit mix with current and savings accounts ratio (CASA ratio) rising further to 79% in 2017 from 77% in 2016. NIM in 4Q17 was higher than that of 3Q17 due to HIBOR hike starting Oct 17. The NIM is likely to further expand in 1Q18.

Non-interest income recorded strong growth. Among fee income, stockbroking and related services fee income soared 42% yoy due to robust market sentiment. Net trading income rose 41% yoy to HK$699m as a result of favourable market conditions. The bank also improved product portfolio and customer analysis, which lead to a 34% yoy rise in wealth management-related income.