The Hong Kong Mortgage Corporation Limited (HKMC) made the following announcement today (Friday 28 April 2006).
Financial Results for 2005
The HKMC and its subsidiaries (the "HKMC Group") reported an audited profit after tax (PAT) of HK$600.6 million for 2005. This is the second highest PAT achieved by the Corporation, after the record PAT of HK$664 million in 2004. Return on shareholders' equity was 13.6% (2004: 17.1%). The capital-to-assets ratio was 12% (2004: 9.3%), equivalent to a capital adequacy ratio of 24% when computed in accordance with the Banking Ordinance. The cost-to-income ratio was 14.6% for 2005 (2004: 12.2%). The financial results of the HKMC Group are at Annex A.
The amount of mortgage loans purchased in 2005 was HK$2.9 billion (2004: HK$11.4 billion). Given the high mortgage prepayment rate in 2005, the outstanding principal balance of the retained mortgage portfolio was HK$29.5 billion at 31 December 2005 (2004: HK$34.9 billion).
The Board recommended and the Shareholders approved a final dividend of HK$250 million or HK$0.125 per share, representing a dividend payout ratio of 41.6% for the year. Payment of the dividend will be made in May 2006.
Business Performance
The Mortgage Insurance Programme (MIP) launched in March 1999 has gained increasing public acceptance. For 2005, the programme has achieved remarkable growth both in terms of business volume (increase in drawdown volume by 27% from HK$14.2 billion in 2004 to HK$18 billion in 2005) and market penetration ratio (increase from 16% for 2004 to 20% for 2005).
During the year the Corporation started the development of a credit scoring model to refine its risk-based pricing framework. The model allows the level of insurance premium to be adjusted downwards for MIP borrowers with better credit standing. The launch date of the risk-based premium pricing scheme is tentatively scheduled for 22 May 2006.
Initially, this model for premium reduction will only cover mortgage loans with LTV ratio of up to 85%. For eligible borrowers, the premium discount could range from 5% to as high as 20% of the gross premium amount. In addition, a loyalty discount of 15% will be offered to repeat MIP borrowers (i.e. those who have utilised mortgage insurance with the HKMC before) with good previous repayment record.
This model at present does not apply to loans above the 85% LTV threshold because the Corporation needs access to the credit data reports from TransUnion Information Services Limited for the calibration of the credit scoring model to apply to a wider range of borrowers.
For mortgage acquisition, the Corporation's purchase in 2005 was mainly from the Authorized Institutions and developers. The Corporation is keeping an eye out for broadening its purchase opportunities.
In terms of debt issuance, the HKMC issued a total of HK$5.1 billion corporate debts under its Debt Issuance Programme and Retail Bond Issuance Programme in 2005. It also securitised HK$1 billion mortgage loans into mortgage-backed securities (MBS). During October 2001 to December 2005, the HKMC issued eight retail bonds in 26 tranches, including its first ever US$ tranches issued in 2005, for a total amount around HK$11 billion through the offering mechanism by placing banks. As at 31 December 2005, the HKMC has 101 debt issues with a total amount of HK$28 billion outstanding. For the fifth consecutive year, the HKMC is the most active corporate issuer and MBS promoter in the Hong Kong dollar debt market.
Appointment of Board of Directors
The HKMC held its 9th Annual General Meeting (AGM) today. Ten Directors have been re-appointed by the Financial Secretary for another term, including Mr Ronald Arculli, Mr Chan Kam Lam, Mr Ambrose Lau, Mr Edward Lau, Dr David Li, Mr Frederick Ma, Mr Abraham Shek, Mr Sin Chung Kai, Mr Michael Suen and Mr David Sun. Four new Directors have been appointed by the Financial Secretary to replace Professor Andrew Chan, Mr Cliff Forster, Mr David Lam and Mr Kenny Lam who had not offered themselves for re-appointment. The new Directors are Professor K. C. Chan, Mr Geoffrey Mansfield, Mr Nick Sibley and Mr Eddie Tan. The composition of the new Board of Directors is at Annex B.
Professor K. C. Chan is the Chairman of the Consumer Council as well as Dean, School of Business and Management and Chair Professor of Finance of Hong Kong University of Science and Technology. Mr Geoffrey Mansfield is a Director of PrimeCredit Limited. Mr Nick Sibley is Head of Personal Financial Services Asia-Pacific of The Hongkong and Shanghai Banking Corporation Limited. Mr Eddie Tan is the Managing Director and Head of Emerging Markets Sales & Trading & Country Treasurer, Hong Kong of Citigroup.
"On behalf of the Board, I would like to thank the outgoing Directors for their invaluable advice and contributions without which the HKMC would not have been able to achieve the results it had accomplished," said Mr Henry Tang, Chairman of the HKMC. "I would also like to welcome the new Directors and look forward to their support in further development of the business of the Corporation," added Mr Tang.
According to the Articles of Association of the Company, at each Annual General Meeting all those Directors who are not Executive Directors shall retire but shall be eligible for re-appointment. Hence, the term of appointment of the current Directors (other than the Executive Directors) will run until the next Annual General Meeting to be held around March/April 2007.
The Hong Kong Mortgage Corporation Limited
28 April 2006
Annex A and B
