### For more information: Brian Leong, Vice President & Corporate Communications Manager (DL)

Transcription

1 Bank of America (Asia) Announces Strong Earnings for 2004 Core operating profit before provisions up by 10.3% Compares highly favorably with the industry HONG KONG, April 29, 2005 Bank of America (Asia) today reported operating profit before provisions for 2004 increased by 10.3% to HK$536.4 million, achieving one of the highest yearover-year growth rates in core operating profits across all banks in Hong Kong. Operating profit after provisions rose by 19.2%. Net profit after tax rose by 13.8% to more than HK$450 million. In reviewing the results, chief executive Samuel Tsien noted that the bank s proper positioning in people and products enabled the bank to fully capitalize on the economic recovery in Hong Kong and the strong growth in Macau, which contributed to the growth in core earnings. During 2004, market sentiments improved and business investments resumed. A mild inflation of 0.5% in the second half of 2004 was noted, officially ending the deflation that persisted in Hong Kong for nearly six years. Unemployment rate also dropped to a 3-year low of 6.5% at the end of the year. Property prices rebounded, and the number of homeowners with negative equity fell significantly. The Hong Kong economy recorded a full year GDP growth of 8.1%, the highest growth rate in four years. Likewise, Macau s double-digit economic growth continued. The GDP growth in 2004 of 28% was driven by foreign investments associated with the expansion of the gaming and related industries, increasing tourist arrivals from China and government-led infrastructure development. Tsien said, Riding on the recovery, the bank s efforts to generate new loans particularly in the commercial and retailing sectors have reaped impressive results. Strong growth in our loan portfolio was recorded. Total loans outstanding increased by 12% over the previous year on a period-end comparison basis, with commercial loans increased by 21% over 2003 and consumer loans by 7%. - more -

2 The abundance of the Hong Kong dollar liquidity in the market during most of last year drove interest rates down to very low levels. As a result, despite the acute price competition particularly in the mortgage loan market, structural spreads widened for the bank s loan products and net interest margin, which reflected the interest spread earnings from the bank s core banking operation, increased from 1.91% in the previous year to 1.96%. Net interest income rose by 4.7%. Successful pursuit of wealth management, trade and insurance agency services contributed to our impressive fee revenue performance. Including income from retail foreign exchange services, our non-interest revenue from core operations recorded a year-over-year increase of 24.5% as we deepened our relationships with clients. Our expenses continued to be prudently managed, with increased spending primarily associated with infrastructure improvement and investments directly associated with the generation of revenue. With operating income increasing at a rate higher than operating expenses, our efficiency as measured in terms of the expense-to-revenue ratio improved from 46.8% in the prior year to 45.8% in 2004, said Tsien. Against a recovering economy in Hong Kong, the bank s highly satisfactory portfolio quality improved even further. At the end of 2004, the ratio of non-performing loans to total loans was only 0.23%, which further improved from 0.67% of the previous year and significantly better than the industry s average of 1.62%. Loans overdue for over three months was only 0.04% of total loans outstanding, comparing very favorably with the market average of 1.04% at year-end was also a strategic year for the bank in terms of new markets, products and channel positioning. We established our first presence in China by opening a Representative Office in Guangzhou. Although our U.S. parent company, Bank of America, has established its presence in China since 1981 which focuses on providing corporate and institutional banking services to multinational companies, this new presence under the banking license of Bank of America (Asia) will enable us to take advantage of market access benefits specifically allowed for Hong Kong incorporated banks under the Closer Economic Partnership Arrangement between Mainland China and Hong Kong. We will apply for this Representative Office to be upgraded to branch status in two years, thus allowing us to commence retail banking operation in China then, said Tsien. - more -

3 In Macau, the bank s business model of offering integrated consumer and commercial banking services proved to be highly successful. The expansion initiative launched in 2003 enabled us to report an 80% increase in net profit last year over the previous year. Loans outstanding increased by over 50% and non-interest revenue grew over 90%. With continued tremendous economic growth and wealth accumulation expected, coupled with consistent government policies conducive for business investments, we have plans to expand our operation in Macau, continued Tsien. Looking ahead, the bank is generally confident that the revival in consumer spending and improvement in consumer confidence will be sustainable for Hong Kong. Continued economic growth is anticipated, particularly given the deeper and higher level of integration with Mainland China driven by government policies and facilitated by infrastructure developments. After recording a high growth of 8.1% in 2004, we expect Hong Kong s GDP growth to moderate to the range of 4.5% to 5.5% in 2005, but that of Macau to continue to grow in the double digit range. Although general developments are favorable to our economies, there are challenges and concerns. The high oil prices and rising interest rates will have a dampening effect on consumer spending worldwide. China s cost efficiency and huge market potential will directly compete for investment capital with Hong Kong. On the other hand, our greater economic integration with China, which has enormously facilitated Hong Kong s recovery, will expose our business environment more directly to the policy risks in China. Hong Kong s small but entirely open economy also makes it readily susceptible to external market volatilities. Meanwhile, competition in the banking sector will continue to be acute, in both pricing and credit underwriting, added Tsien. Established in 1912, Bank of America (Asia) is wholly owned by Bank of America Corporation in the United States and is one of the highest rated banks in Hong Kong. With 16 branches in Hong Kong and Macau, the bank offers a wide range of consumer and commercial banking products and services, including a full array of deposit and loan products, trade finance, foreign exchange, factoring, leasing, insurance, investment and electronic banking services. Bank of America (Macau) is a wholly owned subsidiary of Bank of America (Asia). -more-

4 Bank of America is one of the world s largest financial institutions and the largest consumer and commercial bank in the United States. It serves individual consumers, small businesses and large corporations with a full range of banking, investing, asset management and other financial and riskmanagement products and services. In the U.S., it has full-service consumer and commercial operations in 29 states and the District of Columbia, serving 33 million consumer relationships and 2.5 million businesses. Internationally, it serves clients in 150 countries around the world ### For more information: Brian Leong, Vice President & Corporate Communications Manager (DL)

5 I. CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2004 HK$'000 HK$'000 Interest income 896, ,747 Interest expense 197, ,998 NET INTEREST INCOME 698, ,749 Other operating income 290, ,689 OPERATING INCOME 989, ,438 Operating expenses 453, ,259 OPERATING PROFIT BEFORE PROVISIONS 536, ,179 Charge for bad and doubtful debts - 36,000 OPERATING PROFIT 536, ,179 Gain on disposal of fixed assets 30 8,676 (Loss)/gain on disposal of non-trading securities (2) 6 536, ,861 Share of profit before taxation of an associated company 8,104 13,489 PROFIT BEFORE TAXATION 544, ,350 Taxation 93,682 76,173 NET PROFIT ATTRIBUTABLE TO SHAREHOLDERS 450, ,177 ========= ========= Dividends ========= ========= 1

6 II. CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2004 HK$'000 HK$'000 ASSETS Cash and short-term funds 7,667,294 7,200,749 Placements with banks and other financial institutions maturing between one and twelve months 2,192,371 2,812,733 Placements with banks and other financial institutions maturing over twelve months 62,202 - Certificates of deposit held 465, ,653 Advances to customers and other accounts 25,036,581 22,247,109 Non-trading securities 3,446,287 3,454,002 Investment in an associated company 78,269 68,759 Deferred tax assets 40,207 39,561 Fixed assets 101, ,123 TOTAL ASSETS 39,089,565 36,377,689 =========== =========== LIABILITIES Deposits and balances of banks and other financial institutions 921,259 1,277,893 Deposits from customers 29,468,713 28,126,771 Certificates of deposit issued 1,000,000 - Other accounts and provisions 923, ,679 TOTAL LIABILITIES 32,313,526 30,053,343 CAPITAL RESOURCES Share capital 310, ,131 Reserves 6,465,180 6,013,487 Proposed final dividend TOTAL CAPITAL RESOURCES 6,776,039 6,324,346 TOTAL LIABILITIES AND CAPITAL RESOURCES 39,089,565 36,377,689 =========== =========== 2

7 (i) Advances to customers and other accounts HK$'000 HK$'000 Advances to customers 24,493,833 21,885,477 General provision (237,478) (235,057) Specific provision (1,019) (8,184) Net advances to customers 24,255,336 21,642,236 Accrued interest 58,999 44,035 Other accounts 722, ,838 25,036,581 22,247,109 ========== ========== Included in advances to customers are : Trade bills 1,326,415 1,031,630 ========== ========== (ii) Gross advance to customers by industry sectors HK$'000 HK$'000 Loans for use in Hong Kong : Industrial, commercial and financial - Property investment 6,998,791 4,966,029 - Financial concerns 126, ,048 - Stockbrokers and share financing 250, ,833 - Wholesale and retail trade 669, ,626 - Manufacturing 892, ,007 - Transport and transport equipment 538, ,412 - Others 735, ,474 10,212,145 7,993,429 Individuals - Loans for the purchase of flats in the Home Ownership Scheme, Private Sector Participation Scheme and Tenants Purchase Scheme 32,766 37,367 - Loans for the purchase of other residential properties 8,923,734 9,372,071 - Others 3,134,334 2,879,811 12,090,834 12,289,249 Trade finance 1,227, ,258 Loans for use outside Hong Kong 963, ,541 Total loans and advances 24,493,833 21,885,477 ========== ========== 3

8 (iii) Non-performing loans are analysed as follows: 2004 % of gross 2003 % of gross HK$'000 advances HK$'000 advances Non-performing loans 57, , Aggregate amount of specific provision (1,019) - (8,184) (0.04) Advances net of specific provision 56, , ======= ==== ======= ===== At 31 December 2004, there were no non-performing loans in respect of advances to banks and other financial institutions (2003: Nil). The above specific provisions were made after taking into account the value of collateral in respect of such advances. (iv) Advances to customers overdue for more than three months Gross amount of overdue loans % % HK$ 000 of total HK$ 000 of total Six months or less but over three months 5, , One year or less but over six months 4, , Over one year - - 2, Total advances overdue for more than three months 10, , ====== ===== ====== ===== Market value of security held against the secured overdue loans 16,988 40,176 ====== ====== Secured overdue loans 10,273 32,780 ====== ====== Unsecured overdue loans - 1,456 ====== ====== 4

9 (v) Overdue advances and rescheduled advances are reconciled to non-performing loans as follows: Advances to customers HK$'000 HK$'000 Advances which are overdue for more than three months 10,273 34,236 Add: advances which are overdue for three months or less and on which interest is being placed in suspense or on which interest accrual has ceased: - Rescheduled advances 8,191 29,198 - Other advances to customers 22,300 33,061 Add: advances which are not overdue and on which interest is being placed in suspense or on which interest accrual has ceased: - Rescheduled advances 7,315 39,199 - Other advances to customers 9,201 9,615 Non-performing loans 57, ,309 ======= ======= (vi) Rescheduled advances net of amounts in advances which are overdue for more than three months: % of % of HK$ 000 total HK$ 000 total Advances to customers 15, , ====== ===== ====== ===== (vii) Repossessed assets At 31 December 2004, the repossessed assets of the and the Bank included in advances to customers amounted to HK$1,329,000 (2003: HK$14,730,000). Provision has been made on the shortfall between the expected sales proceeds from realisation of the repossessed assets and the outstanding advances. 5

10 (viii)gross advances to customers by geographical areas HK$'000 HK$'000 Hong Kong 23,420,829 21,060,589 Others 1,073, ,888 24,493,833 21,885,477 ========== ========== (ix) Overdue and non-performing loans by geographical areas HK$'000 HK$'000 Hong Kong 52, ,980 Asia Pacific excluding Hong Kong _5,178 7,329 57, ,309 ======= ======= The geographical analysis is based on location of the customers and has not been taken account of transfer of risk. (x) Cross-border claims Banks and financial institutions Others Total HK$ 000 HK$ 000 HK$ 000 As at 31 December 2004 Asia Pacific excluding Hong Kong 3,350, ,384 4,033,496 North and South America 2,597,485 38,045 2,635,530 Middle East and Africa 1,916 9,148 11,064 Europe 7,155,155 53,071 7,208,226 Caribbean - 10,371 10,371 13,104, ,019 13,898,687 ========== ======== ========== Banks and financial institutions Others Total HK$ 000 HK$ 000 HK$ 000 As at 31 December 2003 Asia Pacific excluding Hong Kong 2,436, ,659 2,925,940 North and South America 3,143,327 34,281 3,177,608 Europe 7,571,620 53,026 7,624,646 13,151, ,966 13,728,194 ========== ======= ========== The geographical analysis has been taken account of transfer of risk. 6

11 (xi) The following information is presented based on the principal place of operation of the Bank and its subsidiaries as responsible for reporting the results or booking the assets: 2004 Contingent Profit liabilities Operating before Total Total and income taxation assets liabilities commitments HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 Hong Kong 941, ,390 37,916,713 31,432,723 2,922,583 Macau 54,755 28,173 2,159,699 1,944, ,562 Less:Intra-group items (6,358) - (986,847) (1,063,419) (120,000) 989, ,563 39,089,565 32,313,526 3,254,145 ========= ======== ========== =========== ========== 2003 Contingent Profit liabilities Operating before Total Total and income taxation assets liabilities commitments HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 Hong Kong 905, ,439 35,542,384 29,469,526 3,614,515 Macau 39,541 15,282 1,737,202 1,555, ,359 Less:Intra-group items (31,500) (25,371) (901,897) (972,152) (120,000) 913, ,350 36,377,689 30,053,343 3,902,874 ========= ======= ========== ========== ========== (xii) The s operating income, net of interest expense, is attributable to the following business segments: HK$'000 HK$'000 (i) Consumer banking activities : 616, ,471 Residential real estate loans; Personal loans and overdrafts; Auto finance; Securities services and other fees and commissions; Deposits from individuals (ii) Commercial banking activities : 342, ,949 Commerical and industrial loans and overdrafts; Trade finance; Machinery and equipment leasing; Stockbroker finance; Deposits from businesses (iii) Treasury activities : 30,054 65,018 Foreign exchange; Money market activities; Liquidity management 989, ,438 ========= ========= 7

12 (xiii)capital adequacy and liquidity ratios percentage percentage Capital adequacy ratio as at 31 December ====== ====== Adjusted capital adequacy ratio as at 31 December ====== ====== Average liquidity ratio for the year ====== ====== The capital adequacy ratio is computed on a consolidated basis, including the Bank and its subsidiary, Bank of America (Macau) Limited, and in accordance with the Third Schedule of the Banking Ordinance. The adjusted capital adequacy ratio, which is computed on a consolidated basis, including the Bank and its subsidiary, Bank of America (Macau) Limited, and in accordance with the guideline Maintenance of Adequate Capital Against Market Risks issued by the Hong Kong Monetary Authority, taking into account the market risk as at the balance sheet date. The average liquidity ratio is computed on a single company basis and in accordance with the Fourth Schedule of the Banking Ordinance. The liquidity ratio is calculated as the simple average of each calendar month s average liquidity ratio for the twelve months of the financial year of Hong Kong offices and is computed in accordance with the Fourth Schedule of the Banking Ordinance. 8

13 (xiv) Components of capital base after deductions The capital base after deductions used in the calculation of the above capital adequacy ratios as at 31 December and reported to the Hong Kong Monetary Authority is analysed as follows: HK$ 000 HK$ 000 Core capital: Paid up ordinary share capital 300, ,000 Reserves 5,918,290 5,528,588 Profit and loss account 435, ,430 Total core capital 6,653,992 6,219,018 Supplementary capital: Reserve on revaluation of holding of securities not held for trading purpose (479) (413) General provisions for doubtful debts 237, ,057 Irredeemable cumulative preference shares 10,131 10,131 Gross value of supplementary capital 247, ,775 Total capital base 6,901,122 6,463,793 ========= ========= Deductions: Shareholdings in subsidiaries 16,000 16,000 Equity investments of 20% or more in non-subsidiary companies 10,411 10,411 26,411 26,411 Total capital base after deductions 6,874,711 6,437,382 ========= ========= 9

14 (xv) Currency concentrations USD MOP Total HK$ 000 HK$ 000 HK$ 000 As at 31 December 2004 Equivalent Equivalent Equivalent Spot assets 12,322, ,520 12,657,867 Spot liabilities (11,348,059) (417,989) (11,766,048) Forward purchases 17,009,096-17,009,096 Forward sales (17,857,360) - (17,857,360) Net long/(short) position 126,024 (82,469) 43,555 =========== ======= ========== Net structural position - 35,097 35,097 =========== ======= ========== USD MOP Total HK$ 000 HK$ 000 HK$ 000 As at 31 December 2003 Equivalent Equivalent Equivalent Spot assets 862, ,982 1,124,828 Spot liabilities (1,024,402) (288,884) (1,313,286) Forward purchases 3,116,742 34,951 3,151,693 Forward sales (2,958,240) (34,951) (2,993,191) Net short position (3,054) (26,902) (29,956) ========== ======= ========== Net structural position - 35,097 35,097 ========== ======= ========== The structural assets of the include investment in an overseas subsidiary. Samuel N. Tsien President and Chief Executive Officer Bank of America (Asia) Ltd. 10