sam88 2008-2-12 08:58 AM
BEA net to beat subprime
BEA net to beat subprime
Bank of East Asia (0023) is tipped to report a healthy increase in net profit for the 2007 fiscal year despite absorbing subprime-related losses of up to HK$1.4 billion.
Based on estimates of 19 brokers polled by Thomson Financial, Hong Kong-based BEA - due to announce its results on Friday - is expected to report net profit climbing to an average of HK$3.952 billion, up 15 percent over the previous year.
"The major growth driver will be the interest income of the bank's China business and its non-interest income in Hong Kong," Kim Eng Securities analyst Ivan Li told The Standard.
Nomura International (HK) analyst Kevin Chan put BEA's collateralized debt obligations-related losses at between HK$760 million and HK$1.4 billion last year, but said this will be fully or substantially offset by one-off gains from asset disposals.
In the first half of 2007, the bank booked an exceptional gain of HK$214 million mainly from property revaluations and securities disposals. It reaped another HK$407 million from selling its asset management subsidiaries.
If BEA managed to sell all 500 million shares it held in Bank of China (3988) in the second half of 2007, it would have gained another HK$500 million, bringing total disposal gains to HK$1.121 billion - essentially offsetting the CDO-related losses.
Meanwhile, in terms of growth, BEA's business in the mainland grew the fastest in 2007 compared to its other segments, Li said, adding he expects the China operations to contribute 22 percent of the bank's total net profit.
BEA shares closed yesterday at HK$40.25, down 3.8 percent.
