4 highlights of BOCHK's 1H13 results revealed

Fee income was up a robust 23%.

According to CCB International, 1H13 earnings beat. BOC Hong Kong (BOCHK) reported net profit of HK$11.3b, in line with our forecast and ahead of consensus of HK$11.1b. 

Strong NII growth driven by sequential margin expansion and a recovery in fee income was offset by higher loan provisioning and lower-than-expected property revaluation gains.

Core operating trends were strong as pre-provision operating profit of HK$14.1b was up 10% YoY and ahead of our HK$13.4b forecast.

Here's more from CCBI:

• Highlights. (1) Net interest margins were up 11bp sequentially to 1.67% driven by higher deposit spreads and improving corporate loan pricing; (2) Fee income was up a robust 23% sequentially to HK$4.7b driven by strong showings in brokerage, insurance and fund distribution;

(3) Loan growth was steady at 7% HoH and, contrary to peers, the growth was not primarily driven by trade financing indicating a higher quality of growth; and (4) In light of the credit cycle continuing to play out, management indicated that its risk appetite in lending to SOEs has not changed.

• Lowlights. (1) Core Tier-1 decreased 110bp sequentially to 11.2% driven by implementation of Basel III which caused risk-weighted assets to increase 14% sequentially. There was also the implementation of higher risk weightings for residential mortgages;

(2) Loan impairment charges of HK$368m (9bp) were higher than expected as management was proactive in building the general allowance; and (3) Deposit growth was a little underwhelming at 3% HoH as decreases in both USD and HKD deposits were more than offset by an increase in RMB deposits.