HANG SENG BANK(00011)2023-08-18 08:37Financial Performance - Net operating income before expected credit loss changes increased by 29% year-on-year to HKD 19,940 million[2]. - Profit attributable to shareholders rose by 79% year-on-year to HKD 9,827 million[2]. - Profit before tax increased by 71% year-on-year to HKD 10.961 billion, while profit attributable to shareholders rose by 79% to HKD 9.827 billion, and earnings per share increased by 83% to HKD 4.99[20]. - The company reported a net profit of HKD 9,822 million for the six months ending June 30, 2023, compared to HKD 5,497 million for the same period in 2022, representing an increase of 78.5%[145]. - Total operating income for the first half of 2023 reached HKD 18,016 million, up 35.5% from HKD 13,309 million in the first half of 2022[143]. Income and Revenue Growth - Net interest income recorded a strong growth, with net interest margin increasing by 62 basis points to 2.09%[8]. - Non-interest income increased by 55%, driven by strong performance in equity-related wealth sales and new revenue sources from structured products[13]. - Wealth management business revenue increased by 10% year-on-year and 40% compared to the second half of the previous year[8]. - Wealth management and personal banking business pre-tax profit increased by 100% to HKD 7.043 billion, driven by a 68% growth in net interest income[32]. - The company reported a net service fee income of HKD 2,666 million, slightly up from HKD 2,746 million in the same period of 2022[143]. Customer and Market Engagement - Wealth management and personal banking services saw a 25% year-on-year increase in the number of high-end, mass-market, and emerging affluent customers[11]. - Digital service usage among new customers reached 98%, with active users of mobile wealth management and digital banking growing by 59% and 22% year-on-year, respectively[12]. - The number of new SME clients increased by 15% year-on-year, with new mainland clients more than doubling compared to the previous year[12]. - The wealthy customer base increased by 25% year-on-year, with the establishment of four cross-border wealth management centers in the Greater Bay Area[33]. Capital and Liquidity Management - The capital adequacy ratio improved, with the common equity tier 1 capital ratio at 16.8%, up from 15.2%[2]. - The liquidity coverage ratio decreased to 230.6% from 281.3% year-on-year[2]. - Customer deposits decreased by 8%, but the liquidity coverage ratio stood at 230.6%, significantly above the regulatory requirement of 100%[15]. - The bank's common equity tier 1 capital ratio was 16.8%, the tier 1 capital ratio was 18.5%, and the total capital ratio was 20.0% as of June 30, 2023[16]. Risk Management and Economic Outlook - The company continues to monitor risks in the commercial real estate sector, maintaining a cautious approach due to ongoing economic uncertainties[26]. - The company is committed to investing in IT systems and service resilience to support business operations and mitigate potential disruptions[42]. - The company has identified major macro-financial risks, including rising inflation and geopolitical tensions, as significant downside risks to the economic outlook[67]. - The expected credit loss estimates involve significant judgments and assumptions, particularly in light of rapidly changing economic conditions and the distribution of economic outlooks[79]. Sustainability and Digital Initiatives - The company aims to achieve net-zero carbon emissions by 2030 and has received recognition for its sustainable development efforts[6]. - The company is actively involved in the digital currency pilot program, with three use cases selected for the Hong Kong Monetary Authority's digital Hong Kong dollar initiative[4]. - The company launched Hong Kong's first NFT wallet, HS3, and introduced a low-carbon themed A-share ETF[9]. - The company has been recognized as one of the top 1% in the S&P Global 2022 ESG ratings for Chinese enterprises[6]. Dividends and Shareholder Returns - The company announced a second interim dividend of HKD 1.10 per share, totaling HKD 2.20 per share for the first half of 2023[10]. - The company declared dividends totaling HKD 5,927 million, which includes HKD 3,824 million from the fourth interim dividend of 2022 and HKD 2,103 million from the first interim dividend of 2023[149]. Operational Efficiency - Operating expenses rose by HKD 340 million, or 5%, to HKD 7.156 billion, reflecting continued investment in technology and increased marketing expenses[27]. - The cost-to-income ratio improved by 8.3 percentage points to 35.9% due to a 29% increase in net operating income before expected credit loss provisions[28]. - The company continues to monitor regulatory compliance and conduct risk related to the transition from LIBOR to alternative benchmarks[53].