BOCHK net income up 20.8% to US$6.21b in 9M 2023

Net interest margin rose 36 basis points during the first nine months of 2023.

Bank of China Hong Kong’s net operating income for the first nine months of 2023 rose by 20.8% to HK$48.62b (approximately US$6.21b), its latest financial statement revealed.

Taking into account the funding income or cost of foreign currency swap contracts, net interest income would have risen by 35% year-on-year to HK$39.48m (US$5b) during the period.

Net interest margin stood at 1.62%, up 36 basis points (bp) from the same period in 2022. BOCHK attributed this to rising market interest rates.

Loan and deposit spread widened and there was also an increase in the average balance of advances to customers and debt securities investments, BOCHK said.

Net fee and commission income, meanwhile, fell by 7.4% to HK$7.22b (US$922.7m). The drop mainly attributed to weakened investor confidence in the market, a decline in imports and exports, and dampened trade and credit demand. As a result, commission income from securities brokerage, insurance, funds distribution  and management, loans, bills and payment services decreased, BOCHK said.

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Meanwhile, commission income  from credit card business and currency exchange rose thanks to iincreased consumer confidence and travel following the reopening of Hong Kong’s borders. 

Operating expenses increased by 6.6% during the period, with BOCHK embarking on enhanced brand promotion and marketing in view of the improved market environment. The bank also incurred higher daily operating expenses and business-related expenses as economic activities gradually resumed. 

“As a result, staff costs rose, along with business promotion, information technology, advertising and  telecommunications expenses. The group’s cost to income ratio was 24.84%, maintaining a  satisfactory level relative to industry peers,” BOCHK said in its latest financial statement.

Q3 net income up 14%
In the third quarter, BOCHK’s net operating income before impairment allowances rose 14% to over HK$17.76b (approximately US$2.27b). 

Taking into account the funding income or cost of foreign currency swap contracts, net interest margin is higher by 10 basis points compared to Q2, at 1.72%. In the same context, net interest income would be 10.5% higher to HK$14.49b (US$1.85b).

Net fee and commission income fell by 4.3% from the previous quarter, mainly due to a drop in loan commissions amid further weakening of credit demand in the market. 

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Commission income from insurance and funds distribution also decreased, while that from securities brokerage, currency exchange, trust and custody services, payment services and bills increased.

Operating expenses rose by 6.2% in Q3 compared to Q2, as staff costs, information technology and business-related expenses increased, whilst depreciation and amortisation decreased.

Net charge of impairment allowances amounted to HK$1.5b (US$191.6m), up by HK$635m quarter-on-quarter. This was mainly due to additional impairment allowances, BOCHK said.

(US$1 = HK$7.82; as of 3 November 2023)