The Hong Kong Mortgage Corporation Limited (HKMC) made the following announcements today:
Half-year financial results
The unaudited interim results (Annex A) show that the operating profit before tax for the six months ended 30 June 1998 was HK$28.2 mn. This has enabled the HKMC to recoup the full amount of the operating loss of HK$20.3 mn incurred in 1997, which largely represented the start-up expenses. Return on shareholder's equity was 5% (annualized).
The outstanding mortgage portfolio held by the HKMC increased from HK$650 mn as at end-December 1997 to HK$4,141 mn as at end-June 1998. A general provision for bad and doubtful debts amounting to HK$6.5 million was charged to the profit & loss account as at 30 June 1998. No specific provision was made for the period, reflecting satisfactory credit quality of the mortgage portfolio. The capital-to-assets ratio remained high at 20.4%.
Quality of asset portfolio
Notwithstanding a correction in property prices, the mortgage portfolio held by the HKMC is of very high quality, helped by the prudent mortgage purchasing criteria. The weighted average Loan to Valuation (LTV) ratio at origination was 63.9% and the current LTV ratio was estimated to be 60.7% as at end-July 1998. The Debt-to-Income ratio remained low at 38%. None of the mortgage loans in the portfolio are behind payment for more than 60 days (see Annex B).
Regular Programme for the purchase of Fixed Rate Mortgages
The six-month Pilot Scheme for promoting fixed rate mortgages is due to expire in mid-September. The product has been very well received by the home buyers. As at 10 September 1998, 980 loans involving HK$1,350 million have been approved in principle. Of these, 523 loans involving HK$734 million have been drawn down. The favourable response to the Programme has also stimulated the introduction of similar products in the market by a number of property developers and banks.
In view of the favourable market response, the HKMC has decided to roll the Pilot Scheme into a regular programme and offer fixed rate mortgages as one of its standard products. The number of participating banks will be increased from 2 to 8:
- Bank of East Asia
- Chase Manhattan Bank
- Chekiang First Bank
- Dao Heng Bank
- First Pacific Bank
- Hang Seng Bank
- Hongkong and Shanghai Banking Corporation
- Standard Chartered Bank
The HKMC plans to pre-commit a total of HK$3.5 billion for the purchase of fixed rate mortgages during the six-month period from mid-September 1998 to mid-March 1999 (an technical note on the regular programme is at Annex C).
Appointment of Ms Pamela Lamoreaux as Chief Operating Officer
The Board of Directors today appointed Ms Pamela Lamoreaux as the Chief Operating Officer of the HKMC. Ms Lamoreaux joined the Corporation in August 1997 as Senior Vice President (Operations). Before joining the HKMC, she was Director of International Housing Services of Fannie Mae and has over ten years of experience in secondary mortgage business.
In commenting on the recent developments of the HKMC, Mr. Donald Tsang, Chairman of the HKMC, said "I am very pleased with the performance of the HKMC. The interim results are encouraging. Although the Corporation has commenced operation for less than a year, it has clearly established its role as a driving force in Hong Kong's secondary mortgage business."
Mr. Joseph Yam, Deputy Chairman of the HKMC, said, "It is assuring to see that the mortgage portfolio is of very exceptionally high quality with no loans overdue for more than 60 days. Going forward, we will continue to ensure that the Corporation is run on a prudent basis."
Hong Kong Mortgage Corporation
14 September 1998
