The Hong Kong Mortgage Corporation Limited (HKMC) made the following announcement today (Thursday).
Financial Results for 2006
The HKMC and its subsidiaries (the HKMC Group) are pleased to announce the annual financial results for 2006. The profit after tax (PAT) for the year ended 31 December 2006 was HK$682.7 million, 13.5% over 2005. This is a record PAT for the Corporation since its establishment in March 1997. Return on shareholders' equity was 13.9% (2005: 13.6%). The capital-to-assets ratio was 11.2% (2005: 12%). The cost-to-income ratio was 13.5% for 2006 (2005: 14.7%). The financial results of the HKMC Group are at Annex A.
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 36.6% for the year.
Business Performance
The loans purchased by the Corporation in 2006 amounted to HK$6.4 billion (2005: HK$2.9 billion). The Corporation pursued a business diversification strategy as approved by the Board in 2006. Taking into account repayments and run-off due to competitive refinancing in the mortgage market, the outstanding principal balance of the loan portfolio was HK$32.4 billion as at 31 December 2006 (2005: HK$33.5 billion).
The Mortgage Insurance Programme (MIP) continued to enjoy good public acceptance, despite the subdued property market environment. For 2006, the programme achieved a business volume of HK$9.2 billion and the market penetration ratio was around 13%. As 90% of the drawdown in 2006 were on properties in the secondary market, this demonstrated again the importance of the MIP to help homebuyers in the secondary market. The drawdown volume under the MIP is expected to increase further in 2007 with recovery in the property market.
In terms of debt issuance, the HKMC issued a total of HK$13.3 billion corporate debts under its Debt Issuance Programme and Retail Bond Issuance Programme in 2006, making the HKMC the most active corporate debt issuer in the Hong Kong dollar market for the sixth consecutive year. In September 2006, the HKMC offered a total value of HK$1.3 billion equivalent of retail bonds to the public. In November 2006, the HKMC successfully launched the first ever and largest triple-A rated partially guaranteed issue of Hong Kong dollar mortgage-backed securities (MBS) totalling HK$2 billion under its Bauhinia MBS Programme. As at 31 December 2006, the total amount of outstanding debt securities and MBS were HK$28.9 billion and HK$5.4 billion respectively.
The solid performance of the HKMC through the past ten years is regarded by international credit rating agencies to have contributed to the Corporation's strong credit rating. In July 2006, Standard & Poor's upgraded both the long-term local and foreign currency ratings of the Corporation to AA from AA-. In October 2006, the HKMC made history as the first entity, and so far the only one in Hong Kong, to have achieved a long-term local currency rating of Aaa by Moody's. The Corporation's foreign currency issuer rating has also been upgraded by Moody's to Aa1, just a notch below the top rating of triple-A.
With the HKMC's top credit standing in Hong Kong, solid financial performance and prudent risk management framework, the Corporation is well positioned to share its expertise and contribute to market development in the region. This will reinforce Hong Kong's financial intermediation role in the region and its position as an international financial centre. In this regard, the HKMC is planning to establish a Medium Term Note Programme to broaden its investor base in the international market. This also helps to further develop a Hong Kong quasi-sovereign benchmark for market participants.
Appointment of Board of Directors
The HKMC held its 10th Annual General Meeting today. Ten directors have been re-appointed by the Financial Secretary for another term - Mr Ronald Arculli, Professor K C Chan, Mr Chan Kam Lam, Dr David Li, Mr Frederick Ma, Mr Geoffrey Mansfield, Mr Abraham Shek, Mr Sin Chung Kai, Mr Michael Suen and Mr Eddie Tan. Four new Directors have been appointed by the Financial Secretary - Mr K P Chan, Mr Eddy Fong, Mr Andy Hon and Mr Andrew Leung. The composition of the new Board of Directors is at Annex B. The new appointments have been made to replace Mr Ambrose Lau, Mr Nick Sibley and Mr David Sun who had not offered themselves for re-appointment. The Board noted with great sadness the passing away of Mr Edward Lau, who served as a Director of the Corporation from December 2004 to March 2007.
"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 furthering the 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 office of these Directors will run until the next Annual General Meeting to be held around April 2008.
Annex A and B
The Hong Kong Mortgage Corporation Limited
26 April 2007
