The Hong Kong Mortgage Corporation Limited (HKMC) made the following announcements today (Thursday):
Half-year Financial Results
The unaudited interim results show that the operating profit after tax for the six months ended 30 June 2001 was HK$110.3 million, a reduction of HK$16.7 million or 13.1% compared with the corresponding period last year. Annualised return on average shareholder's equity was 8.3% (2000: 9.4%). The capital-to-assets ratio remained strong at 9.9%. The interim results and a financial review are attached at Annex A.
Total assets increased by 53.4% from HK$14.8 billion at the end of 2000 to HK$22.7 billion. The HKMC expects improvement in profits in the second half of 2001 due to the significant increase in mortgage purchase and growth in business volume under the Mortgage Insurance Programme (MIP). Despite the difficult market environment, the Corporation purchased HK$4.6 billion of mortgages in the first six months and has secured firm offers of HK$8.6 billion (including another HK$5 billion from the Housing Authority) for settlement in the second half of the year. The aggregate amount of HK$13.2 billion has already exceeded the business target of HK$12.5 billion set for the year, and is more than double the mortgage purchase amount of HK$6.35 billion achieved in 2000.
Through product diversification and effective marketing, the HKMC received 4,442 mortgage insurance applications in the first 6 months of 2001 involving a total mortgage loan amount of HK$8 billion. This is significantly higher than the corresponding figures of 1,984 applications and total mortgage loan amount of HK$4.1 billion for the same period in 2000. Secondary market transactions continued to account for about 77% of the applications received in the first half of 2001. This shows that the MIP has helped to enhance the liquidity of secondary property market transactions.
Reflecting the prudent purchasing criteria adopted by the Corporation, the delinquency ratios of loans overdue for more than 90 days in the retained mortgage portfolio and the MIP portfolio were 0.42% and 0.12% respectively at the end of May, substantially lower than banking industry average of 1.42%.
The HKMC maintained its status as the most active fixed rate debt issuer in the Hong Kong dollar debt market in the first half of 2001 with a total issuance amount of HK$10.7 billion under its Note Insurance Programme and Debt Issuance Programme to support the expansion of its business.
Credit Rating Results
The international credit rating agencies Moody's and Standard & Poor's have assigned credit ratings to the HKMC which are the same as those of the Government of the Hong Kong Special Administrative Region (HKSAR):
Moody's cited the strong support of the HKSAR Government and the good financial fundamentals of the HKMC, including the strong performance of Hong Kong mortgage obligations under stress, in affirming the HKMC's credit ratings. Standard & Poor's highlighted the important strategic role of the HKMC, high quality assets, strong profitability, solid funding capability and strong capital position as the major factors behind its ratings.
"The strong credit ratings are a due recognition of the important strategic role performed by the HKMC in Hong Kong's banking, housing and capital markets, and the ability of the Corporation to achieve its core missions whilst operating as a prudent and profitable business," said Mr Antony Leung, Chairman of the HKMC. "The ratings have re-affirmed the credit-worthiness of the HKMC to potential investors, both in Hong Kong and overseas. This has substantially enhanced the flexibility of the Corporation in diversifying its funding source and the investor base of its debt securities to cover the international capital market," he added.
Expansion of Mortgage Insurance Programme (MIP)
The Board of Directors of the HKMC approved today an increase in the loan size ceiling for mortgages covered under the MIP from HK$5 million to HK$8 million. The expansion will cover initially mortgage loans for completed properties with loan-to-value (LTV) ratio of up to 85%.
The MIP was launched by the HKMC in March 1999 with the aim of promoting home ownership in Hong Kong. The Programme currently covers mortgage loans for both completed properties and properties under construction (equitable mortgages), both up to a maximum loan size of HK$5 million. On the request of banks and with the support of the Approved Reinsurers, the HKMC has decided to raise the maximum loan size to HK$8 million. The new product is expected to be launched in September 2001.
Eligibility criteria for mortgage loans in the HK$5 million to HK$8 million bracket are set out in the technical note at Annex B. Further extension of the HK$8 million loan size ceiling to mortgages with LTV ratio of up to 90% and equitable mortgages will be considered later in the light of feedback from banks and the performance of the loans under the expanded programme.
The Hong Kong Mortgage Corporation Limited
26 July 2001
