Why Hang Seng Bank changed its accounting treatment in Industrial Bank stake

It now reports this holding as a financial investment.

Bernstein Research notes that in January, Hang Seng Bank ceased recognizing its stake in mainland-based Industrial Bank as an "associate" under the equity method and it now reports this holding as a financial investment instead.

Here's more from Bernstein:

The catalyst for this change was the fact that Hang Seng did not participate in Industrial Bank's private placement in January 2013, which led to a its stake in Industrial Bank to fall 200bp to 10.8%.

As a result of the declining stake, it is likely that Hang Seng Bank will also lose its board membership at Industrial Bank and its nominee on the executive committee, which means that it will "no longer be in a position to exercise significant influence over the financial and operating policy decisions of Industrial Bank".

During the half, the bank booked a total one-time gain of HK$9.5 billion that included an accounting gain of HK$8.5 billion and the release of deferred tax of HK$1.0 billion. This was a one-time event and added HK$4.98 to the bank's earning of HK$9.66 per share in H1 2013.

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