BOCHK's profits jumped 18% to HK$11.7b

Boosted by low-base effect.

According to Bernstein Research, Bank of China (Hong Kong) reported yesterday H1 '13 earnings per share of HK$1.06, a 2-3% beat versus us and consensus.

The after-tax profit of HK$11.7 billion was flat YoY and up 18% from a weak H2 '12 result. ROE for the bank was 14.9%, up 170bp from H2 '12 levels but down 170bp from H1 2012 levels.

Here's more:

H1 '13 Pre-Provision Operating Profit (PPOP):BOC(HK)'s H1 '13 PPOP of HK$14.1 billion was up 10% YoY and 23% HoH. The YoY improvement was largely driven by growth of fee income and strong expense control.

Operating Revenues – BOC(HK) reported operating revenues (net of insurance claims) of HK$19.8 billion in H1 '13, 2% stronger than our forecast.

Revenues were up 9% YoY and 12% HoH. The beat  versus our expectations was driven by strong fee income.

Net Interest Income – The bank's H1 '13 net interest income was a positive surprise, up 10% from H2 '12 levels and coming in 2% higher than we forecast as the bank reported a 10bp HoH increase to its NIMs, higher than the 5bp we had expected.

NIMs benefitted from a HoH rise to asset yields of 4bp while funding costs declined 10bp.

Fee Income – BOC(HK)'s H1 '13 net fee income of HK$4.7 billion was up 23% HoH and 14% YoY.  This marked the strongest fee income result at the bank, coming in 14% higher than the previous record booked in H1 '12.

The bank reported record high fees in its insurance business, on loan commissions (mainly from syndicated loan sales) and from its fund distribution business.

While BOC(HK)'s H1 '13 brokerage revenues were far from record levels, they were up 15% HoH and YoY. 

Trading & Other Revenues – At HK$1.78 billion, trading and other revenues were a record high and a sharp increase (+23%) from H1 '12 levels.

Operating Expenses – After showing weak cost control in H2 '12 (highest cost-to-income ratio in over 3 years), BOC(HK)'s expense control improved significantly in H1 '13. Operating expenses grew 6% YoYlower than the 9% growth the bank booked in revenues.

As a result, the bank's cost-to-income ratio was 28.8%, down 90bp YoY and the lowest level level since 2009.