Wing Hang Bank profit up 30%

Net profit for fiscal year 2011 was HK$2.1b.

Kim Eng noted:

The results were in line with our estimates (HK$2.0b), which were at high end of market consensus. Note that results were distorted by a one-off property revaluation gain of around HK$468m.

This is not unexpected though, as WHB booked the majority of it in 1H11. Final DPS was HK$1.34, bringing the total DPS to HK$1.80, and WHB kept its payout ratio unchanged at 25%.

Analyst comment:

• Stripping out the one-off gain, FY11 pre-provision operating profit (PPOP) rose by 21% yoy to HK$2.0b, 2H11 PPOP rose by 16% hoh, mainly driven by fair value (FV) gain of financial instruments. Note that WHB suffered FV loss of financial instruments, in 1H11 and FY10.
• Net interest income was inline, while net fee income was lower than expected. The FV gain was a positive surprise.
• The jump in expenses (8% yoy, 21% hoh) is higher than expected.
• FY11 net interest margin (NIM) was 1.67%, 17bps lower than FY10. The hoh fall in NIM is more worrying, as 2H11 NIM fell by 8bps hoh, to 1.63%.
• We also saw NPL ratio and amount rebound, on both hoh and hoh basis, albeit from a very low base.
• Dec11 core and total CAR stood at 10.1/15.8%, slightly lower than Jun11. Core CAR level looks a bit low, and is the second lowest among all banks that announced results. Fund raising need is not imminent, given that WHB has a low payout ratio (25%) and relatively high ROE. The low CAR will however still be investors’ concern.
• While the results were at high end of market consensus, we think it is only satisfactory. The falling NIM and rising NPL may cause some concern.