Hang Seng Bank 2012 Annual Results Announcement Speech by Ms Rose Lee Vice-Chairman and Chief Executive 4 March 2013

Transcription

1 Hang Seng Bank 2012 Annual Results Announcement Speech by Ms Rose Lee Vice-Chairman and Chief Executive 4 March 2013 Good afternoon, ladies and gentlemen. Before we proceed with the results announcement, may I draw your attention to the words on forward-looking statements on the screen. All figures are in Hong Kong dollars unless otherwise stated. Business Overview Under challenging operating conditions, Hang Seng achieved resilient results in 2012 while investing in our core businesses to drive sustainable growth. Profit attributable to shareholders increased by 15% on the prior year with return on equity reaching 22.9%. Our balanced growth strategy drove double-digit increases in both deposits and lending, while effective funding cost management contributed to the widening of our net interest margin to 1.85%. Successful revenue diversification and product cross-sell initiatives contributed to an 8% increase in non-funds income. We achieved revenue growth in life insurance and retail investment fund sales of 49% and 25% respectively, and our overall wealth management income grew by 14%. Our cost efficiency ratio improved by 0.6 percentage points to 34.4% as a result of revenue growing faster than operating expenses. The credit quality of our loan portfolio remained sound, with a reduction in loan impairment charges. Leveraging our good China connectivity and product development strength, we continued to lead the market with innovative offshore renminbi products, including the first renminbidenominated gold exchange-traded fund (ETF) to be introduced to the market. In mainland China, Hang Seng China continued to invest in network expansion and leverage the deepening connectivity between the Mainland and Hong Kong. We opened seven new

2 2 outlets and enhanced cross-border business referral mechanisms. We also established the first joint venture securities investment advisory company in Guangdong under CEPA. Financial Performance Profit attributable to shareholders rose by 15% to $19,426 million compared with Earnings per share were up 15% at $ The Directors have declared a fourth interim dividend of $2.00 per share. This brings the total distribution for 2012 to $5.30 per share up from $5.20 in Profit before tax was up 15% at $22,113 million, reflecting an increase in return from Industrial Bank and a disposal gain from the sale of our general insurance business in July. Following our continuing investment for business expansion, operating profit rose by 10% to $15,606 million. Operating profit excluding loan impairment charges increased by 9% to $15,992 million. Operating expenses rose by 6% to $8,389 million, due mainly to increases in staff compensation and benefits, increased marketing expenditure, and higher rental and depreciation costs. With the 8% increase in net operating income before loan impairment charges outpacing the increase in operating expenses, our cost efficiency ratio improved to 34.4% down 0.6 percentage points compared with Return on average shareholders funds was 22.9%, compared with 22.7% in Total assets grew by $101 billion, or 10%, to reach $1,077 billion. The return on average total assets was 1.9% up 0.1 percentage point year on year. On a Basel II basis, our capital adequacy ratio on 31 December 2012 was 14%, compared with 14.3% a year earlier. Our core capital ratio was up 0.6 percentage points at 12.2%. The expansion in customer deposits and lending underpinned a 4% rise in average interestearning assets. Improved deposit and loan spreads and increased return on the life insurance investment funds portfolio drove the 8% growth in net interest income to $16,946 million. Net interest margin was 1.85% an increase of seven basis points.

3 3 Net fee income rose by 5% to $5,086 million. Growth in fee-related revenue from retail investment fund sales as well as credit card, insurance agency and trade-related services business more than offset the drop in fee income from stock broking and related services. Trading income was up 15% at $2,063 million. We recorded a net revenue gain from securities, derivatives and other trading activities compared with a net loss in Increased net income from funding swaps supported an 8% growth in foreign exchange income. Loan impairment charges were down 12% at $386 million. Loan impairment charges in the second half of 2012 fell by 45% compared with the first half. Our share of profits from associates rose by 33%, driven largely by the increase in contribution from Industrial Bank. On 8 January, we announced that we will no longer account for Industrial Bank as an associate following its completion of a private placement on 7 January. We will now recognise our holding as a financial investment and will therefore not account for our proportionate share of results and net assets. Loans and Deposits Gross advances to customers were up 11% at $537.6 billion compared with the end of Effective management of credit risk resulted in an eight-basis-point improvement in impaired loans as a percentage of gross advances to 0.25%. Loans for use in Hong Kong increased by 10% to $376.2 billion. Loans to businesses grew by 9%. Our effective customer relationship management strategy and in-depth knowledge of local industries enabled us to achieve balanced loan growth across sectors. Lending to individuals rose by 12%. Despite keen market competition, our competitively positioned home mortgage proposition supported a 16% increase in residential mortgage loans. Loans for use outside Hong Kong rose by 24%, driven largely by Mainland-related lending.

4 4 Customer deposits, including certificates of deposit and other debt securities in issue, increased by 10% to $818.8 billion, reflecting trust in the Hang Seng brand during a period of economic uncertainty. Hong Kong and Other Businesses Retail Banking and Wealth Management in Hong Kong achieved a 22% increase in profit before tax to $7,939 million. Excluding the general insurance business disposal gain, profit before tax was up 19%. Net interest income rose by 11% to $8,761 million, reflecting increases in deposits, unsecured lending and return from the insurance investment funds portfolio. As part of our customer acquisition strategy, we redesigned Prestige and Preferred Banking Centres to support an increase in the number of affluent clients. This and other initiatives contributed to growth of 9% in the deposit base. Compared with 2011, the numbers of Prestige Banking and Preferred Banking customers rose by 11% and 8% respectively. The increase in balance sheet strength supported an 11% rise in lending. We maintained a strong position in residential mortgage business, using our premium service proposition and innovative products such as Hong Kong s first renminbi/hong Kong dollar dual-currency-linked mortgage account to attract target customers. The number of credit cards in issue rose by 5%. Card spending and receivables were up 11% and 10% respectively, underpinning the 8% growth in revenue from credit card business. Non-interest income increased by 9% to $3,822 million and wealth management income grew by 19% to $5,328 million. Income from life insurance business increased by 51% to $2,833 million. We leveraged our extensive distribution network and diverse range of insurance offerings including new products to further tap strategic customer segments recording a 13% rise in annualised life insurance new premiums and a 9% increase in total life insurance policies in-force. Investment services revenue declined by 4% to $2,339 million. While we grew the number of securities accounts, reduced stock market activity resulted in a 26% fall in income from stock

5 5 broking and related services. Innovative products drove increases in retail investment fund income and sales turnover of 36% and 74% respectively. Corporate and Commercial Banking in Hong Kong registered a 27% increase in profit before tax to $5,878 million. Excluding the general insurance business disposal gain, profit before tax was up 24%. Net interest income rose by 16% to $5,289 million. A 13% increase in the customer base was achieved. Capitalising on our cross-border services initiatives, we built further momentum in recruiting Mainland companies, which represented 46% of newly acquired customers in the second half of 2012, compared with 34% in the first half. Two new Business Banking Centres were opened to acquire targeted SME customers in Hong Kong. The growth in the number of customers underpinned a 10% increase in deposits. The number of renminbi accounts was up 25%. Lending grew by 10%. We increased our participation in syndicated lending to rank as the number two mandated arranger in Hong Kong and Macau in 2012 based on the number of transactions. At the end of 2012, renminbi loans had increased by 214% compared with a year earlier. We continued to strengthen our support for SME customers. Over $3.7 billion in loan facilities were approved under the SME Financing Guarantee Scheme in the seven months following the Hong Kong Government s introduction of the 80% guarantee protection in June We also launched a number of new SME services in 2012 including Business Mobile Banking and a Mainland toll-free direct hotline. These new services enhance convenience and the service experience for customers and have been well received by SMEs. Treasury in Hong Kong recorded a 6% decrease in profit before tax to $2,364 million. Net interest income declined by 11% to $1,676 million. The low interest rate environment and flattened yield curves offered few opportunities for yield enhancement and constrained re-pricing levels as balance sheet management portfolios matured. Non-interest income rose by 12% to $960 million. Trading income increased by 13% to $988 million. We responded swiftly to rising customer demand for renminbi-denominated products,

6 6 reinforcing our position as a market leader and supporting solid growth in option trading income from structured products. Leveraging our trusted brand, we launched 10oz and 100g Hang Seng Gold Bars with a Chinese New Year Dragon motif. Building on the success of these products, we introduced God of Wealth-themed bars in the same weights earlier this year. Mainland Business Hang Seng China continued to expand the network selectively in high-growth regions, broadening business partnerships, enhancing cross-border referral mechanisms to increase customer acquisition and strengthening brand positioning. The improvements in crossborder referrals also contributed to an increase in new customers acquired by Corporate and Commercial Banking in Hong Kong. We extended the reach of our Mainland business by seven outlets in 2012 to a total of 46 in 17 cities. We opened a new branch in Xiamen and sub-branches in the Bohai rim in Beijing and Tianjin. We also established cross-city sub-branches in Shunde, Zhuhai and Jiangmen in Guangdong province, where we now have 21 outlets, as we continue to leverage the increasing economic integration of Guangdong with Hong Kong. Deposits rose by 13% and lending increased by 16%. Total operating income increased by 9%, underpinned by a 9% rise in net interest income. Operating expenses increased by 15%, due largely to new investments in long-term business growth which, together with a net loan impairment charge compared with a net release in 2011, led to a 29% decline in operating profit. Including the share of profit from Industrial Bank, profit before tax from our Mainland business grew by 30%, contributing 25% of Hang Seng s total profit before tax compared with 22% a year earlier. Our wholly owned subsidiary, Hang Seng Securities, entered into a partnership with Guangzhou Securities to open the first joint venture securities investment advisory company in Guangdong under CEPA.

7 7 Positioning For Growth While global macroeconomic uncertainties will persist in 2013, we expect stable economic growth on the Mainland and favourable policy development under CEPA and the Qianhai initiatives. Hong Kong s economy will be underpinned by firm domestic consumption, strong trade and capital flows from the Mainland, and will continue to benefit from initiatives to further promote the internationalisation of the renminbi. As the leading domestic bank in Hong Kong supported by a strong brand, extensive branch network and a loyal customer base, Hang Seng is well positioned to benefit from China's economic transformation. We will maintain balanced growth in our core businesses, invest in our branch network, delivery channels and product propositions to increase target customer intake and drive wealth management revenues. We will increase connectivity to maximise cross-border opportunities from the closer integration of the Mainland and Hong Kong economies. In 2013, Hang Seng celebrates its 80th anniversary. Throughout our history, we have upheld the principles of service excellence, integrity and sound business management established by our founders. True to our roots, we remain committed to the community we serve through ongoing support for sports promotion, education and care for the aged and disabled, partnering with charitable organisations, and engaging staff volunteers. We will adhere to a high standard of corporate governance while embracing a proactive approach to business and client management to deliver quality and sustainable growth in the best interests of customers and shareholders. Thank you.