HONG KONG MONETARY AUTHORITY Annual Report 1996

HONG KONG MONETARY AUTHORITY

 

Kong (excluding trade finance) accelerated strongly, expanding by 17.0% in 1996, compared with 11.0% a year earlier. Residential mortgage lending grew by 22.7%. But a major impetus was also increased lending to property development and investment, which grew by 26.1%, following a modest 3.0% rise in 1995 (Chart 14).

PROFITABILITY MAINTAINED

The underlying profitability of the banking sector grew at a more modest rate in 1996 when compared with the results of 1995. For the sector as a whole, pre-tax operating profits in respect of Hong Kong offices grew by 5.6% compared to 19.7% in 1995. After-tax profits rose by 3.8% in 1996, down from 14.5% in 1995. The slowdown was largely due to a decline in offshore lending activities of some foreign authorised institutions. The trends, in the case of locally incorporated banks were more mixed. Growth in pre-tax operating profits moderated from 20.0% in 1995 to 16.0% in 1996, because of the increase in the bad debt charge. However, growth in post-tax profits increased to 12.7% compared with 10.7% in 1995 as a result of the impact of profit on disposals and exceptional items. The pre-tax return on assets (ROA) for local banks in terms of operating profits was virtually unchanged at 2.00% compared with 1.99% in 1995 (Table 4).

Table 4:
RETURN ON ASSETS FOR LOCALLY INCORPORATED BANKS
       
    Contribution to ROA
% of average total assets
Components of ROA19951996
1. Net interest margin 2.33 2.41
2. Other operating income 1.06 1.07
3. Total operating income (1+2) 3.39 3.48
4. Operating expenses 1.31 1.30
5. Bad debt charge 0.08 0.18
6. Other provisions 0.01 0.00
7. Operating profit before tax (3-4-5-6) 1.99 2.00
8. Profit on disposals and exceptional items 0.09 0.07
9. Profit before tax (7+8) 2.08 2.07
10. Taxation 0.29 0.31
11. Extraordinary items 0.03 0.02
12. Post tax profits (ROA) (9-10+11) 1.82 1.78
   
 

 

 

back | forward