STOCKWATCH: Dao Heng Bank lower ahead of interim results

HONG KONG (AFX-ASIA) - Dao Heng Bank shares were lower at midday ahead of the bank's interim results this afternoon, dealers said. For the six months to December reporting period, Dao Heng is expected to benefit from the continued decline in provisions as a result of the domestic economic recovery, they said. At 12:03 pm, Dao Heng Bank was down 0.40 hkd at 36.60 on trade of 322,000 shares. The Hang Seng financial sub-index was 5.07 points lower at 19,918.82 and the Hang Seng Index was down 68.20 points at 13,435.97. Andrew Cheong, an analyst with ING Barings, said Dao Heng Bank is expected to announce a net profit of 914 mln hkd for the six months to December compared with 800.84 mln a year earlier. "This represents an earnings growth of 14.0 pct (year-on-year)... the rise is due to the lower loan provision," he said. He said he is positive about the prospects for Dao Heng Bank because of the strong growth potential among second-tier banks in Hong Kong. His house has a "buy" rating for Dao Heng Bank, he added. Patrick Pong, an analyst with South China Brokerage, said Dao Heng Bank should see a 10-20 pct growth in net profit for the first half, driven by the lower loan provision. However, he said the bank is likely to suffer from a lower return rate because of a high capital adequacy ratio (CAR) of 23.0 pct, compared with the minimum requirement of 8.0 pct under the Hong Kong Bsted in buying assets from its parent, but it (has) never happen(ed)... with a high CAR ratio, it will have a lower rate of return," he said. He said Dao Heng is less competitive than Dah Sing Financial because of the latter's higher net interest margin. "Dao Heng has a net interest margin of around 2.60 pct, compared with the 3.70 pct of Dah Sing," he said. Pong said his house has a "buy" rating for Dao Heng Bank, with a target price of 45.0 hkd.

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