The Hong Kong Mortgage Corporation Limited (HKMC) today (28 September) announced the highlights of its unaudited consolidated financial results1 for the first six months of 2023 (1H 2023) noted below.
2023 Half-Year Unaudited Financial Results Highlights
The unaudited profit after tax of the HKMC for 1H 2023 was HK$1,041 million (1H 2022: loss after tax of HK$299 million). The profit turnaround was primarily due to (a) the annuity business turned to profit from an accounting loss for 1H 2022 as a result of higher investment income from its placements with the Exchange Fund in 1H 2023 as compared to a provision made for its investment in the same period of last year; and (b) favourable insurance results for the Reverse Mortgage Programme (RMP) mainly arising from the rebound of property price in 1H 2023.
After excluding the financial results of HKMC Annuity Limited (HKMCA), a wholly-owned subsidiary of the HKMC operating annuity business, and the impact of property price change on the insurance result of the RMP, the adjusted profit after tax, annualised return on equity and cost-to-income ratio for 1H 2023 would be HK$365 million, 5.4% and 26.6% respectively (1H 2022: HK$356 million, 5.3% and 24.0% respectively).
Having included the capital injection of HK$2.5 billion during the period, the embedded value of the annuity business as at 30 June 2023 was about HK$13.9 billion, which comprised HK$11.5 billion of total equity and HK$2.4 billion of present value of future profits. This indicates a sound financial position of the HKMCA to develop its business in the long term.
The Capital Adequacy Ratio (CAR) of the HKMC remained solid at 18.1% as at 30 June 2023, well above the minimum ratio of 8% stipulated by the Financial Secretary. The solvency ratios of HKMC Insurance Limited (HKMCI), another wholly-owned subsidiary of the HKMC operating general insurance business, and the HKMCA were about 13 times and 19 times respectively as at 30 June 2023, well above the respective 200% and 150% minimum regulatory requirements stipulated by the Insurance Authority.
Amid uncertain market conditions, the HKMC adopted prudent prefunding strategy and proactively communicated with local and international investment communities for debt issuance to support its sizable loan purchase and fulfil its refinancing needs. With strong financing capability and liquidity position, the HKMC’s core operations remain resilient and stand ready to cope with any financial turbulence ahead in performing its strategic policy roles and attaining its social objectives.
2023 Half-Year Business Performance Highlights
Asset Purchase and Securitisation
- Purchased HK$1.2 billion of loan assets (1H 2022: HK$2.6 billion)
- Purchased HK$15.6 billion of loans (1H 2022: HK$11.8 billion) from the Special 100% Loan Guarantee under the SME Financing Guarantee Scheme (SFGS), and HK$15.8 million of loans from the Dedicated 100% Loan Guarantee Schemes (DLGS) which was launched on 29 April 2023
- Completed the first issuance of infrastructure loan-backed securities under its pilot scheme on infrastructure financing securitisation. The issuance consists of multiple classes of US dollar-denominated secured notes backed by the cash flows from a diversified portfolio of project and infrastructure loans across multiple geographies and sectors, with a total size of US$404.8 million
- Outstanding principal balance of loan portfolio was HK$106.3 billion as at 30 June 2023 (31 December 2022: HK$101.6 billion)
- Issued corporate debts totalling HK$65.6 billion for 1H 2023, of which HK$58.6 billion with tenor of one year or above (1H 2022: totalling HK$58.1 billion, of which HK$46.3 billion with a tenor of one year or above), being the most active issuer in the domestic market of Hong Kong dollar corporate bonds
- Outstanding balance of debt securities issued was HK$155.5 billion as at 30 June 2023 (31 December 2022: HK$131.1 billion)
- Credit ratings of AA+ from S&P Global Ratings and Aa3 from Moody’s, same as those of the HKSAR Government
Mortgage Insurance Programme (MIP)
- New MIP loans drawn down amounted to HK$51.4 billion (1H 2022: HK$50.7 billion)
- 74% of loans drawn down (in terms of loan amount) were secured on properties in the secondary market, demonstrating the importance of the MIP to homebuyers in the secondary market
SME Financing Guarantee Scheme
- In respect of the 80% Guarantee Product, as at the end of June 2023, more than 24,400 applications were approved with a total loan amount of approximately HK$107.1 billion since its launch in May 2012
- In respect of the 90% Guarantee Product, as at the end of June 2023, more than 9,200 applications were approved with a total loan amount of approximately HK$17.5 billion since its launch in December 2019
- In respect of the Special 100% Loan Guarantee, as at the end of June 2023, more than 63,300 applications were approved with a total loan amount of approximately HK$130.7 billion since its launch in April 2020, of which HK$129.6 billion of loan assets were purchased by the HKMC
- As at the end of June 2023, the 80% and 90% Guarantee Products and the Special 100% Loan Guarantee had benefitted more than 57,000 local small and medium-sized enterprises and approximately 747,000 related employees since their inception
Dedicated 100% Loan Guarantee Schemes
- The DLGS for Travel Sector and the DLGS for Cross-boundary Passenger Transport Trade were launched on 29 April 2023. As at the end of June 2023, 32 applications for a total loan amount of approximately HK$43.8 million had been approved
- In support of green transport development, the DLGS for Battery Electric Taxis was launched on 4 September 2023 to encourage taxi owners to replace their liquefied petroleum gas, petrol or hybrid taxis with electric taxis
Reverse Mortgage Programme
- 277 applications were approved (1H 2022: 323 applications), with an average property value of HK$5.4 million and an average monthly payout of HK$17,800
HKMC Annuity Plan
- 814 policies were issued (1H 2022: 1,727 policies), with total premiums received of around HK$0.7 billion (1H 2022: HK$1.2 billion) and an average premium of HK$831,000 (1H 2022: HK$703,000)
100% Personal Loan Guarantee Scheme (PLGS)
- With the local economic recovery and decreased unemployment rate, the application period of the PLGS expired at the end of April 2023
- Around 67,000 applications were approved with a total loan amount of approximately HK$4.7 billion since its launch in April 2021
Further details of the HKMC’s unaudited consolidated financial results and financial review for 1H 2023 are set out in the Annex.
The Hong Kong Mortgage Corporation Limited
28 September 2023
1 From 1 January 2023, the HKMC has adopted Hong Kong Financial Reporting Standard 17 “Insurance Contracts” (HKFRS 17). As required by the accounting standard, the HKMC applied the requirements retrospectively with comparative figures previously published under Hong Kong Financial Reporting Standard 4 “Insurance Contracts” (HKFRS 4) restated from 1 January 2022, the transition date. Further information on the impact of this change is set out in the Financial Review section of this announcement.