HANG SENG BANK(00011)2024-03-11 08:34Financial Performance - The net operating income before expected credit loss changes and other credit impairment provisions for 2023 was HKD 40,822 million, an increase of 19% from HKD 34,399 million in 2022[5]. - Operating profit for 2023 reached HKD 19,946 million, representing a 55% increase from HKD 12,899 million in 2022[5]. - Profit attributable to shareholders for 2023 was HKD 17,848 million, up 58% from HKD 11,286 million in 2022[5]. - The average return on ordinary shareholders' equity for 2023 was 11.3%, compared to 7.2% in 2022[5]. - The cost-to-income ratio improved to 35.8% in 2023 from 40.1% in 2022[5]. - Earnings per share for 2023 increased to HKD 8.97, a 62% rise from HKD 5.53 in 2022[5]. - The company's pre-tax profit increased by 57% year-on-year, reaching HKD 20.1 billion[15]. - Return on equity rose by 4.1 percentage points to 11.3%[15]. - The bank's total loans decreased by 7% compared to December 31, 2022, due to strategic measures to reduce credit risk[21]. - The bank declared a fourth interim dividend of HKD 3.20 per share, totaling HKD 6.50 per share for the full year, a 59% increase year-on-year[16]. Asset and Equity Management - The total assets as of December 31, 2023, were HKD 1,692,094 million, a decrease of 9% from HKD 1,854,446 million in 2022[5]. - The total equity attributable to shareholders was HKD 168,131 million, up 5% from HKD 159,933 million in 2022[5]. - The common equity tier 1 capital ratio improved to 18.1% in 2023 from 15.2% in 2022[5]. - The liquidity coverage ratio for 2023 was 260.7%, down from 281.3% in 2022[5]. - The bank's capital ratios remain strong, with a Common Equity Tier 1 capital ratio of 18.1% and a total capital ratio of 21.4%[22]. Risk Management - The company remains vigilant regarding risks, particularly in the uncertain recovery of the mainland commercial real estate sector[41]. - The risk management framework is based on a three-line defense model, which helps in identifying, assessing, managing, and reporting risks effectively[66]. - The board of directors is ultimately responsible for managing risks and approving the risk tolerance levels of the group[67]. - The company conducts regular risk assessments to retain key personnel and ensure effective operations[64]. - The company has implemented a comprehensive stress testing program to assess the impact of severe adverse events on its financial stability[72]. - The company is embedding climate factors into its risk policies and developing indicators to monitor and manage climate risks[74]. Credit Risk and Provisions - The expected credit loss for Stage 3 increased by HKD 975 million to HKD 7.319 billion, primarily due to risks associated with the mainland commercial real estate sector[43]. - The total expected credit loss increased by HKD 2.4 billion to HKD 4.324 billion in the second half of 2023, reflecting higher provisions for impaired credit risks[48]. - The total impaired loans rose from HKD 24.2 billion at the end of 2022 to HKD 24.7 billion at the end of 2023, reflecting downgrades and write-offs in the commercial real estate sector[43]. - The expected credit loss provision for personal loans was 6.05%, while for corporate and commercial loans it was 2.22%[106]. - The expected credit loss for wholesale loans in Hong Kong was HKD 2.533 billion as of December 31, 2023, with a central scenario of HKD 2.362 billion[137]. Customer and Market Engagement - New accounts opened by non-Hong Kong residents increased by 342% due to the expansion of the Greater Bay Area business[15]. - The number of affluent clients grew by 17%, with new private banking accounts increasing by 116%[17]. - Monthly active users of the bank's liquidity management services increased by 16% year-on-year, while retail transaction volumes rose by 115%[29]. - The bank opened six cross-border wealth management centers in major cities in the Greater Bay Area, with a seventh center in Guangzhou set to open in January 2024[26]. - The bank's investment services and insurance business revenue recorded a 17% increase, with new annualized premiums for insurance rising by 174%[27]. Regulatory Compliance and Governance - The company is committed to maintaining dialogue with regulatory bodies regarding the impact of legal and regulatory responsibilities on its business and customers[75]. - The company is actively managing compliance with evolving economic sanctions and trade restrictions, particularly those targeting Russia[76]. - The company has focused on maintaining adequate levels of capital, liquidity, and foreign exchange risk to align with its business strategy and regulatory requirements[176]. - The group is closely monitoring regulatory changes, including the implementation of Basel III reforms expected to positively impact capital ratios upon full implementation[184]. Technology and Innovation - The bank launched the innovative electronic trade financing platform "Hang Seng TradePay" to streamline financing and payment processes[30]. - The bank's new mobile app features a one-stop rewards platform, enhancing customer engagement and experience[25]. - The company is investing resources in advanced analytics and artificial intelligence to combat financial crime and enhance fraud monitoring measures[80]. - The bank launched the Hang Seng A-Share Low Carbon Index ETF, marking Hong Kong's first low-carbon themed A-share ETF[16]. Economic Outlook - The central scenario reflects low economic growth predictions for major markets, with GDP growth in Hong Kong expected to be 2.6% in 2024, which is lower than the average growth rate prior to the pandemic[116]. - The management anticipates that fiscal policy will significantly expand in 2024, introducing more credit easing measures to support the economy[116]. - The economic outlook for 2023's fourth quarter remains stable compared to the previous quarter, despite geopolitical uncertainties[115]. - The unemployment rate in Hong Kong is expected to rise slightly but remain at low levels compared to historical standards[116].