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The Hong Kong Mortgage Corporation Limited

The Hong Kong Mortgage Corporation Limited (HKMC) made the following announcement today (Thursday).

The Hong Kong Mortgage Corporation performed well in 2008. Apart from good financial performance (see below), it has helped maintain banking stability by purchasing loan assets from local banks to address their escalated liquidity and risk management needs amidst the global financial crisis. In recognition of the important strategic role played by the Corporation, the HKSAR Government increased from HK$10 billion to HK$30 billion the size of the Revolving Credit Facility provided by the Exchange Fund to the Corporation.

Financial Results for 2008

Despite the difficult economic environment and volatile market conditions, the Corporation was able to achieve another year of solid financial results. The HKMC and its subsidiaries (the HKMC Group) recorded HK$605 million profit after tax (PAT) in 2008, 18% lower than the record set in 2007 but still comparing well with the market in general. Return on shareholders' equity (RoE) was 10.5% (2007: 13.7%). The decline in PAT and RoE in 2008 was mainly attributable to the prudent provisioning for loan impairment and rising hedging cost of asset-liability management in the global financial crisis environment.

The capital-to-assets ratio remained strong at 8.7% (2007: 11.2%), well above the minimum requirement of 5% stipulated by the Financial Secretary. The cost-to-income ratio was 17.5% for 2008 (2007: 13.6%). The financial results of the HKMC Group are at Annex A.

A final dividend of HK$250 million or HK$0.125 per share, was declared, representing a dividend payout ratio of 41.3% for the year.

Business Performance

The total asset purchase in 2008 reached a record of HK$26 billion, with HK$13.8 billion being assets from banks in Hong Kong and HK$12.2 billion being overseas mortgage loans. The high intake of local purchases is a good illustration of the Corporation's strategic role in providing liquidity to the Hong Kong banking sector and helping them to manage their balance sheets.

The Corporation has maintained its strong commitment to risk management and did not purchase any sub-prime mortgage loans or invest in any sub-prime related products. Taking into account loan repayments and prepayments during the year, the outstanding principal balance of the loan portfolio was HK$50.8 billion as at 31 December 2008 (2007: HK$34.5 billion).

The Corporation's Mortgage Insurance Programme (MIP) continued to provide an effective channel for promoting wider home ownership in Hong Kong. To provide an additional option to homebuyers, the Corporation made an enhancement of the MIP in December 2008 by lowering the threshold above which insurance will be made available from 70% loan-to-value (LTV) ratio to 60%, up to a total LTV ratio of 90%. Mortgage insurance coverage for newly originated mortgage loans rose from HK$13.2 billion to a new record of HK$20.4 billion in 2008 and the market penetration ratio was increased from around 12% to 16% in 2008. As 91% of the drawdown in 2008 was on properties in the secondary market, this demonstrated again the importance of the MIP to help homebuyers in the secondary market.

Attributable to the Corporation's strong government background, solid credit ratings as well as investors' flight-to-quality investment approach, the HKMC issued a record total of HK$24.4 billion corporate debts with tenor up to 15 years in 2008. For the eighth consecutive year, the Corporation maintains its position as the most active corporate debt issuer in the Hong Kong dollar market. To further broaden its investor base and funding source, the Corporation offered a total value of HK$543 million equivalent of retail bonds to the public and issued HK$4.7 billion equivalent of foreign currency debts to overseas institutional investors during the year. As at 31 December 2008, the total amount of outstanding debt securities and mortgage-backed securities issued were HK$42.8 billion and HK$3.2 billion respectively.

Notwithstanding the turbulent environment in 2008, the Corporation once again demonstrated its solid performance and strength in prudent risk management; continuing to be the first and so far the only triple-A rated institution in Hong Kong from Moody's. In July 2008, S&P also upgraded the Corporation's long-term local and foreign currency ratings to AA+ from AA.


The Corporation will seek opportunities to further enrich its product range and continue with its business diversification strategy. This serves to maintain its viability and strengthen its ability to provide liquidity to local banks when necessary as well as meeting the financing needs of the homebuyers.

"The Corporation will focus on satisfying the needs of local financial institutions to offload loan assets in exchange for liquidity. While maintaining a strong emphasis on risk management, the Corporation will also continue to improve its local product offering and promote its business model and risk-management approach in other jurisdictions such as Mainland China. This will contribute towards the healthy development of the Mainland mortgage market and also promote home ownership and a harmonious society." said Mr John C Tsang, Chairman of the HKMC.

Appointment of Board of Directors

The HKMC held its 12th Annual General Meeting today. Ten directors have been re-appointed by the Financial Secretary for another term - Professor K C Chan, Mr Chan Kin-por, Ms Eva Cheng, Professor Anthony Cheung, Mr Eddy Fong, Mr Andrew Leung, Dr David Li, Mr Geoffrey Mansfield, Mr Abraham Shek and Mr Eddie Tan. Four new Directors have been appointed by the Financial Secretary - Ms Tanya Chan, Ms Louisa Cheang, Mr Lester Huang and Ms Starry Lee. The new appointments have been made to replace Mr Ronald Arculli, Mr Chan Kam Lam, Mr David Lam and Mr Sin Chung Kai who had not offered themselves for re-appointment. The composition of the new Board of Directors is at Annex B.

"On behalf of the Board, I would like to thank the outgoing Directors for having generously contributed their time and professional skills to assist in the efficient management of the Corporation. 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." said Mr Tsang.

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 2010.

Annex A & B

The Hong Kong Mortgage Corporation Limited
16 April 2009

Last revision date: 1 August 2011
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