Hang Seng Bank 0011

[winston]

BROKER CALL - Hong Kong's Hang Seng Bank kept 'overweight' - Morgan Stanley

HONG KONG (XFN-ASIA) - Morgan Stanley said it is maintaining its "overweight" rating on Hang Seng Bank as well as its target price of 200 hkd on the stock.

The brokerage said the bank remained its top pick in Hong Kong due to expected strong revenue growth.

"We recently met the management and remain very comfortable with our assumptions. Asset growth is strong, net interest margins are stable and fees income continues to do well," it said.

It raised the earnings per share (EPS) estimates to 9.61 hkd from 9.37 for 2008 and to 10.28 hkd from 10.08 for 2009.

Morgan Stanley said that although investors are concerned that margins will be under pressure due to a lower free funds contribution and deposit spreads, it will be mitigated by better treasury spreads.

It added that a pickup in the sales of yield-enhancing products and insurance as well as growth in banking fees will also help to boost fee income despite weaker equity markets.

The brokerage expects the bank to continue its outperformance after beating the market by 30 pct last year.

[winston]

Not vested.

Hang Seng Bank ekes out H1 profit growth

HONG KONG - Hang Seng Bank, a unit of global lender HSBC Holdings, posted a smaller-than-expected 2.2 per cent rise in first-half earnings on Monday, with interest margins and fee income driving growth.

Analysts said Hong Kong banks have fared better than most financials in Asia in the past year, but are unlikely to repeat that outperformance in this second half as a US economic slowdown will curb Hong Kong's growth and fuel worries about asset quality.

Hong Kong-based Hang Seng, 62 per cent-owned by HSBC, posted January-June profit of HK$9.06 billion (US$1.16 billion), compared with HK$8.87 billion a year ago. Analysts had predicted net profit of HK$9.13 billion, based on forecasts by six analysts polled by Reuters.

'Economic growth in Hong Kong and on the mainland will likely be affected by the US economic slowdown as well as growing inflationary pressures,' chairman Raymond Ch'ien said in a statement.

'However, domestic demand remains resilient on the back of the tight employment market and relatively low interest rate environment, pointing to moderate expansion,' he added.

Excluding a gain of nearly HK$1.5 billion last year on the listing of China's Industrial Bank, Hang Seng's pretax profit rose 20 per cent in the first half. Hang Seng owns 12.78 per cent of mid-sized Industrial Bank, which raised US$2.1 billion in a domestic A-share IPO in February 2007.

Hang Seng, which unlike other Hong Kong banks steered clear of exotic investments such as CDOs (collateralised debt obligations) and SIVs (structured investment vehicles), said first-half net interest income rose 23.2 per cent. Net interest margins improved by 32 basis points to 2.43 per cent.

Net fees and commissions increased 5.8 per cent to HK$3.03 billion thanks to sales of investment products and credit cards.

Hang Seng has 30 outlets in the mainland, where total operating income grew 67 per cent. Including profit from Industrial Bank, mainland business contributed 9.4 per cent of total pretax profit, up from 5.9 per cent a year ago. The bank is aiming to grow this to 10 per cent by 2010.

Industrial Bank estimated earlier that its first-half net profit rose at least 70 per cent, due to wider interest margins.

Hang Seng trades at a robust premium to its local peers, at more than 5 times book value. By comparison, Bank of East Asia trades at 2 times book and BOC Hong Kong trades at 2.3 times book.

Shares in Hang Seng have lost 3.4 per cent this year, outperforming a 19 per cent drop in the benchmark Hang Seng Index. -- REUTERS

[winston]

Not vested.

$9b Hang Seng first half as interest income rises
Stephanie Tong
Tuesday, August 05, 2008

Hang Seng Bank (0011) yesterday posted a market-expected 2008 interim net profit of HK$9.06 billion on rising interest income, up 2.2 percent from a year ago.

Net profit was expected to lie between HK$8.7 billion and HK$9.4 billion, according to four analysts surveyed by The Standard.

Earnings per share were HK$4.74. A second interim dividend of HK$1.10 per share was declared.

Excluding the HK$1.465 billion one-off gain that Hang Seng booked in the first half last year, interim net profit this year rose 22.5 percent from a year ago.

But Hang Seng Bank shares fell 2.02 percent to end at HK$155.40 before the interim results were announced.

Vice chairman Raymond Or Ching- fai said the bank held some notes of Fannie Mae and Freddie Mac early this year. "But as of the end of June, most of them were matured. We currently do not have any holdings of them," he said.

Net interest income, the bank's major income contributor, leaped 23.2 percent from a year earlier to HK$8.25 billion on the increase in average customer advances and deposits.

Gross advances to customers rose by 9.3 percent in the six-month period.

"Loan growth is better than expected," said Kim Eng Securities analyst Ivan Li Sing-yeung.

The aggressive lending was not a cause for worry on Hang Seng's asset quality as its loan impairment allowances were down 32.9 percent to HK$188 million while impairment loan ratio was maintained at 0.4 percent.

"In the second half of the year, loan growth is likely to slow as banks may want to be more prudent in lending," Li said. "It will be seen in all aspects - including personal, corporate and mortgage loans."

Net interest margin widened 32 basis points to 2.43 percent from a year ago.

Net fee income, which includes revenue from wealth management business, rose 5.8 percent to HK$3.027 billion from the first half of last year.

Wealth management business, a growth driver for Hang Seng Bank, reported a mere 2.2 percent increase in income from a year ago as the bank's life insurance funds booked a negative investment return of HK$1.03 billion.

[winston]

Not vested.

BROKER CALL - Hong Kong's Hang Seng Bank target cut to 185 hkd - Morgan Stanley

HONG KONG (XFN-ASIA) - Morgan Stanley said it cut its target price for Hang Seng Bank to 185 hkd from 200 after the bank's first-half results to reflect the tougher operating environment.

It maintained its "overweight" rating on the bank.

The brokerage said the first half results show that the bank is a big beneficiary of the current credit crunch.

"The standout positive was a sharp pickup in net interest margins, which were up 10 basis points from second half last year and 32 basis points year-on-year. This will continue to help in the second half this year," Morgan Stanley said.

It noted that the bank is also benefiting from higher pricing power in corporate loans as other avenues of funding are closed.

"While net interest margins were strong, overall earnings were marginally lower than expectations, due to weaker-than-expected fees, which were up 6 pct only despite strong capital market activity," it said.

At 10.30 am, Hang Seng Bank was down 1.0 hkd or 0.64 pct at 154.4.

[winston]

Not vested.

Hang Seng Bank looks at Taiwan
Alicja Lam
Wednesday, August 06, 2008

Hang Seng Bank (0011) is eyeing acquisition opportunities to establish a foothold in Taiwan.

"Hang Seng is the Greater China bank. If we expand outside Hong Kong and China it will be in Taiwan," said vice chairman Raymond Or Ching-fai. "But we would take a passive approach, waiting for a chance to acquire banks through merger and acquisition."

In the first half of the year, Hang Seng's mainland business contributed 9.4 percent of profits before tax. "Profit contribution from the mainland business will reach 10 percent by the end of this year," said Or. This target was previously set for 2010.

According to Or, most of the deposits that Hang Seng China receives are from its prestige clients, which amounted to 20,000 as of June. Prestige clients must deposit a minimum 300,000 yuan (HK$341,531).

Concerning the high 9.3 percent loan growth reported for the first half, Or said corporate and commercial loans will increase but overall loan growth will be slower for the rest of 2008 because of the sluggish property market.

Hang Seng Bank shares fell 0.6 percent to close at HK$154.50.

[winston]

Not vested.

Hang Seng Bank may take hit on WaMu
MandyLo and BenjaminScent

Hang Seng Bank (0011), the least affected lender amid the global financial tsunami, may have to make a provision for the investment of senior debt securities issued by Washington Mutual Bank, which was seized by US regulators.

A Hang Seng spokesman said it holds senior debt securities issued by Washington Mutual Bank, but declined to reveal how much is involved.

"If deemed necessary, we will make appropriate disclosures in accordance with regulatory requirements," he said. "We are aware of our obligations under the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Ltd."

Hang Seng has no collateralized debt obligations or structured investment vehicles and had remained unscathed by the troubles caused by Lehman Brothers and AIG. It did have exposure to Freddie Mac and Fannie Mae, but the products were either sold or expired in June.

Dah Sing Banking Group (2356) said it may have to make a provision for exposure to Washington Mutual Bank, totaling HK$362 million. In the worst-case scenario, it would result in an after-tax charge of HK$330 million on the group's balance sheet.

[winston]

Hang Seng Bank stock plunges on fears over WaMu exposure
MandyLo

Shares of Hang Seng Bank (0011) plunged to a 12-month low yesterday on market concerns over the lender's unknown exposure to the failed Washington Mutual Bank.

The stock closed down nearly 9 percent at HK$131.50 - the lowest level since sinking to HK$131.20 on September 17 last year.

On Wednesday, Hang Seng said it held senior debt securities issued by Washington Mutual - which was seized by US regulators - but refused to disclose how much is involved.

"Write-off of a similarly sized exposure as Dah Sing Bank [which admitted HK$362 million worth of senior debt exposure] would be about 2 percent of Hang Seng Bank's estimated 2008 earnings," wrote Citi analysts.

Based on Citi's projected attributable profit of HK$16.3 billion for Hang Seng Bank for 2008, the write-off could reach HK$326 million if the lender's exposure to senior WaMu debt is similar to that of Dah Sing.

Citi said Hang Seng's total debt exposure related to banks and financial institutions, comprising financial investments, trading assets and financial assets designated at fair value, amounted to HK$162 billion - equaling 22 percent of total assets.

Hang Seng Bank is Hong Kong's second- largest lender by assets.

In the first half, the bank already took a revaluation loss of HK$1.6 billion on Available- For-Sale debt, Citi said.

Citi said it believes the risks of further revaluation losses on AFS securities are clearly rising, amid growing distress and widening credit spreads on Western financial institutions.

"If the bank does have exposure to the troubled banks, it is likely that investors will have to reassess the valuation premium assigned to Hang Seng," said CLSA analyst Kelvin Chan.

Citi reiterated its "sell" rating on Hang Seng Bank, based on core earnings revision pressure, exposure to large banks and financial institutions, and expensive valuation.

[winston]

Not vested.

BROKER CALL - Hang Seng Bank WaMu exposure seen at about 11.2 bln hkd - Goldman

HONG KONG (XFN-ASIA) - Goldman Sachs said it estimates Hang Seng Bank's gross exposure to Washington Mutual Bank (WaMu) at some 11.2 bln hkd.

The US house said the amount would seem to be well above the local lender's description of its investment as "immaterial".

Hang Seng Bank said in a statement late yesterday that its investment in certain senior debt securities issued by failed WaMu is "immaterial".

It did not specify the amount of its "immaterial" exposure to WaMu, which was taken over by the US government last week, and said it is not aware of any matter discloseable under the general obligation imposed by the listing rules of the stock exchange.

Goldman Sachs noted that WaMu's senior debt is trading at around 50 US cents on the dollar and this would imply Hang Seng's gross exposure in the US financial institution at some 11.2 bln hkd.

"We note that Hang Seng holds 140 bln hkd of bank and financial institutions debt as of end June this year . . . of which 60 bln hkd is to banks outside Hong Kong," it said.

The US house noted that Hang Seng's holdings of bank and financial institution debts as of end June was highest in the local banking sector.

It said it is currently reviewing its earnings estimates and share price target on Hang Seng Bank not so much because of its exposure to WaMu and the likely impairment hit that it will incur, but more to the likely reshaping of its treasury book and its impact on its profit and loss statement.

Goldman said it is reasonable to assume that Hang Seng will likely move more of its exposure in US-dollar denominated assets to cash and US Treasuries at the expense of yield because of the deteriorating conditions in the US and European financial sector.

This move will also be prompted by the previously unexpected event of losses on US bank debt paper, it said.

At 11:30 am, Hang Seng Bank shares were down 5.30 hkd or 4.03 pct at 126.20, after tumbling nearly 9 pct yesterday.

[winston]

CORRECTION Hang Seng Bank share selloff 'overdone' on WaMu speculation - Goldman

HONG KONG (XFN-ASIA) - Hang Seng Bank's share price correction yesterday in reaction to its exposure to failed Washington Mutual Bank (WaMu) was overdone, Goldman Sachs said.

The US house said the 24.5 bln hkd decrease in its market capitalization yesterday implied a 5.6 bln hkd loss on its WaMu exposure, given the 4.4 times forward price to book that Hang Seng shares traded at before the share price drop.

"However, with WaMu senior debt trading at around 50 US cents on the dollar, that would imply about 11.2 bln hkd gross exposure to WaMu, which would seem to be well above Hang Seng's statement of immaterial," it said.

Hang Seng Bank said in a statement late yesterday that its investment in certain senior debt securities issued by failed WaMu is "immaterial".

It did not specify the amount of its "immaterial" exposure to WaMu, and said it is not aware of any matter discloseable under the general obligation imposed by the listing rules of the stock exchange.

Goldman Sachs noted that Hang Seng Bank's holdings of bank and financial institution debts as of end June was highest in the local banking sector.

"We note that Hang Seng holds 140 bln hkd of bank and financial institutions debt as of end June this year... of which 60 bln hkd is to banks outside Hong Kong," it said.

It said it is currently reviewing its earnings estimates and share price target on Hang Seng Bank not so much because of its exposure to WaMu and the likely impairment hit that it will incur, but more to the likely reshaping of its treasury book and its impact on its profit and loss statement.

Goldman said it is reasonable to assume that Hang Seng will likely move more of its exposure in US-dollar denominated assets to cash and US Treasuries at the expense of yield because of the deteriorating conditions in the US and European financial sector.

The move will also be prompted by the previously unexpected event of losses on US bank debt paper, it said.


Hang Seng Bank shares today closed down 7.80 hkd or 5.93 pct at 123.70, after tumbling nearly 9 pct yesterday.

[winston]

BROKER CALL - Hong Kong's Hang Seng Bank target cut to 125 hkd - Morgan Stanley

HONG KONG (XFN-ASIA) - Morgan Stanley said it has cut its target price on Hang Seng Bank to 125 hkd from 140 but maintained an "overweight" rating on the Hong Kong lender. "In our view, earnings progression will clearly come under pressure. But even after change in earnings, it should generate return on equity (ROE) above 25 pct," the brokerage said.

It noted that given tier 1 ratio of 11.3 pct, Hang Seng Bank can easily maintain dividend, making it a good defensive stock in the current uncertain environment. Hang Seng Bank shares were down 0.45 hkd or 0.46 pct at 97.45