Dah Sing Group 2018 Interim Results Dah Sing Group
Performance highlights HK$1.75 billion and HK$1.34 billion normalized DSBG and DSFH interim profit before BOCQ impairment Strong core banking earnings and stable general insurance profitability Net interest income growth with mild loan growth and higher net interest margin Faster growth in fee and commission income driving higher non-interest income Improving cost to income ratio with positive Jaws Benign credit quality with low impaired loan ratio and reduced credit impairment losses Robust capital adequacy: CET1:13.4%, T1:14.0%, Total:18.4% Dah Sing Group 2
Financial Highlights Dah Sing Group
Dah Sing Banking Group (2356) HK$ million 1H18 1H17 Change Net interest income 2,114 1,880 +12% Net fee and commission income 617 458 +35% Net trading income and other income 149 127 +17% Total operating income 2,880 2,465 +17% Operating expenses (1,281) (1,226) +5% Credit impairment losses (38) (167) -77% Operating profit after credit impairment losses 1,561 1,071 +46% Profit shared from BOCQ 410 373 +10% Impairment loss on investment in BOCQ (403) --- Profit attributable to shareholders 1,347 1,299 +4% Basic earnings per share ($) 0.96 0.93 Dividend per share ($) 0.13 0.11 Dah Sing Group 4
Dah Sing Financial Holdings (0440) HK$ million 1H18 1H17 Change Net interest income 2,143 1,893 +13% Net fee and commission income 611 455 +34% Net trading income, net insurance premium and other operating income net of insurance claims and expenses 217 197 +10% Total operating income net of insurance claims 2,971 2,545 +17% Operating expenses (1,334) (1,281) +4% Credit impairment losses (39) (167) -77% Operating profit after credit impairment losses 1,598 1,096 +46% Profit shared from BOCQ 410 373 +10% Impairment loss on investment in BOCQ (403) --- Profit attributable to shareholders from continuing operations 1,041 995 +5% Profit attributable to shareholders from discontinued operations --- 3,849 Total profit attributable to shareholders 1,041 4,844 Basic earnings per share from continuing operations ($) 3.11 2.97 Normal dividend per share ($) 0.38 0.32 Special dividend per share ($) --- 6.60 Dah Sing Group 5
Dah Sing Banking Group Dah Sing Group
Key return indicators 16% 14% 12% 11.0% 12.4% 13.9% 10% 8% 6% 4% 2% 1.3% 1.4% 1.6% 0% 1H17 1H18 1H18 (adjusted) * Return on average total assets (annualized) Return on average shareholders' funds (annualized) * Impairment loss on investment in BOCQ was excluded from the calculation of normalized business performance Dah Sing Group 7
Capital adequacy and liquidity Capital adequacy ratio Liquidity maintenance ratio 20% 17.8% 18.7% 18.4% 50% 15% 4.7% 4.7% 4.4% 40% 0.6% 0.6% 30% 10% 13.1% 13.4% 13.4% 20% 43.8% 44.0% 44.0% 5% 10% 0% 30 Jun 17 31 Dec 17 30 Jun 18 0% 30 Jun 17 31 Dec 17 30 Jun 18 CET1 Additional T1 T2 Dah Sing Group 8
HK$ million Gross advances to customers and trade bills 140,000 130,000 121.2 bn 123.3 bn 126.8 bn Loans for use outside HK 120,000 110,000 100,000 24% 23% 23% 2.8% Trade finance and trade bills 90,000 80,000 70,000 60,000 50,000 40,000 10% 13% 18% 10% 13% 19% 11% 13% 18% Credit card advances and other loans to individuals Other commercial lending 30,000 20,000 10,000 0 35% 35% 35% 30 Jun 17 31 Dec 17 30 Jun 18 Residential and commercial property lending Dah Sing Group 9
Net interest margin 2.30% 2.10% 1.98% 1.94% 2.02% 2.09% 1.90% 1.70% 1.50% 1.30% 2017 average 1H17 2H17 1H18 Dah Sing Group 10
HK$ million Income from core businesses 3,000 2,800 2,600 2,400 2,200 2,000 2,465 127 458 5% 19% 2,667 60 594 2% 22% 2,880 149 617 6% 21% Net trading income and other operating income 1,800 1,600 1,400 1,200 1,000 1,880 2,013 2,114 76% 76% 73% Net fee and commission income 800 600 400 Net interest income 200 0 1H17 2H17 1H18 Dah Sing Group 11
HK$ m Credit quality HKAS 39 HKFRS 9 200 167 150 100 50 104 38 Credit impairment losses 0 1H17 2H17 1H18 30 Jun 17 31 Dec 17 30 Jun 18 0.0% 0.5% Overdue and rescheduled assets ratio 1.0% 1.14% 0.82% 0.97% 0.65% 0.81% 0.84% Impaired loan ratio 1.5% Dah Sing Group 12
Commercial banking Better interim profitability due to growing income and benign credit quality and lower impairment charge under HKFRS9 Trade finance grew faster than commercial loans, whilst cross-border lending business was modest, overall mild loan growth Mild NII growth with stable NIM Improving non-interest income with higher credit related and trade related fees Focus on enhancing transactional capability and building deposit franchise Dah Sing Group 13
Personal banking Better interim profitability due mainly to growth of wealth management, stock brokerage and bancassurance income Higher net interest income with stable yield and modest loan growth, whilst credit card business was soft Focus on funding cost control in the face of higher fixed deposit rates, especially US$ deposit rates Benefited from stable credit quality and lower credit cost under HKFRS9 Making investments to improve digital and mobile banking customer experience Dah Sing Group 14
Treasury Better interim profitability due mainly to higher net interest income Conservative liquidity management; average Liquidity Maintenance Ratio at around 44% was well above statutory requirement Prudent treasury portfolio with high average credit rating and relatively short duration to manage credit and interest rate risk Dah Sing Group 15
Overseas banking Macau: Mild profit growth with modest loan growth and steady NIM Consistently benign credit quality Market demand was soft, whilst competition was intense PRC: DSB (China): business recovering but profit contribution remains small BOCQ contributed net profit of HK$410 million during the period, but our investment was impacted by a HK$403 million impairment charge Dah Sing Group 16
Dah Sing Financial Holdings Dah Sing Group
General insurance Modest net premium income growth after reinsurance, with higher gross premium recorded Steady interim profitability with higher premium offset by higher cost incurred for expansion after disposal of Dah Sing Life and Macau Life in 2017 Improving loss ratio with overall claims under control With increased financial strength in our general insurance businesses after the capital injection last year, we are focusing on improving underwriting capability, strengthening distribution and diversifying lines of business Dah Sing Group 18
Key return indicators 10% 10.8% 9.5% 10.6% 5% 1.1% 1.1% 1.2% 0% 1H17 (normalized) * 1H18 1H18 (adjusted) ** Return on average total assets (annualized) Return on average shareholders' funds (annualized) * Gain on disposal of life insurance businesses was excluded for indication of normalized business performance ** Impairment loss on investment in associated company was excluded for indication of normalized business performance Dah Sing Group 19
Conclusions Dah Sing Group
Conclusions Strong growth in underlying earnings, with bottom line impacted by impairment charge on investment in BOCQ Robust capital and liquidity positions Healthy asset quality and lower credit cost with favourable market conditions in 1H18 Strong core banking business resulted in 13.9% normalized return on equity for DSBG Impairment charge on investment in BOCQ was non cash and had no impact on capital adequacy Dah Sing Group 21