Hang Seng Bank's profits jumped 15% to HKD19.4b

Its smaller loan provision also drew positive surprise.

According to Maybank Kim Eng, Hang Seng Bank reported a better-than-expected results for FY12. Net profit increased 15.0% YoY for FY12 to HKD19.4b, which was 15% higher than market consensus. 

Here's more:

Positive surprises lied on smaller loan provision (-12.3% YoY to HKD386m), and gain from associate (China Industrial Bank) (+33.5% YoY to HKD5.4b).

Note that from FY13, HSB’s holding for Industrial Bank will change from an associate to AFS, so earning from Industrial Bank will not account for proportionate share of result from FY13.

NIM slightly rose by 0.1% YoY. NIM from China contracted while NIM in Hong Kong was benefitted from loan repricing, improved liquidity, deleveraging of foreign banks and better product mix. Credit quality was also in a comfortable position with NPL ratio down by 8 bp YoY to 0.25%. 

For outlook in 2013, management addressed that NIM may compress for 2013 given the challenges ahead, including further liberation of interest rate in China, competition from foreign banks and smaller room for further loan repricing.

Core CAR (which was up 0.6 pp to 12.2% for FY12) would face some downward pressure due to Basel 3 requirement, but management was confident the ratio to remain above 10% for FY13.