Dah Sing Bank, Limited
ANNOUNCEMENT OF 1999 INTERIM RESULTS
The Directors of Dah Sing Bank, Limited (the "Bank") announce that the unaudited profit attributable to shareholders was HK$191.2 million for the six months ended 30th June 1999, up 9.3% from the HK$175.0 million for the same period in 1998.
Statement of Compliance
In preparing the 1999 interim financial disclosure, the Bank has fully complied with the recommendations set out in the guideline on Interim Financial Disclosure by Authorized Institutions issued by the Hong Kong Monetary Authority.
Review of Business
The operating environment in the first half of 1999 improved after a difficult and volatile 1998. The steady easing in local interest rates, a recovery in stock prices and stabilization of property prices in the period contributed to lift market sentiment and boost confidence in a gradual economic recovery.
Against such an environment, the Group was able to generate a stronger operating performance relative to the first half of 1998. Net interest income grew 24.4% in the period under review as a result of a higher net interest margin brought about by the wider spread between average Prime rate and interbank interest rates, and a bigger drop in the cost of deposits. Our net interest margin in the first half of 1999 increased to 3.45%, up from the 2.77% experienced in the first six months of 1998. Other operating income was 8.3% higher than that booked in the first six months of 1998 largely due to stronger credit card income and servicing fee from securitized and sold mortgages.
Operating expenses decreased 12.1% when compared with the same period in 1998 as a result of the rigorous efforts taken since 1998 to trim our expense base and improve productivity.
Our charge for bad and doubtful debts was much higher than the first half of 1998. The specific provision charge trebled, reflecting the continued financial difficulties of both corporate and individual borrowers in the difficult phase of the recession. The higher general provision charge in the period resulted from the increase in the outstanding loan balances relative to the end of 1998.
Total loans and advances to customers net of provisions decreased by 5.8% and increased by 6.6% respectively when compared with the balances at the end of June and December 1998 respectively. Increase in residential mortgage loans accounted for the bulk of our loan growth in the period. Total deposits at the end of June 1999, comprised of customers’ deposits and certificates of deposit, were up by 4.4% and 5.8% when compared with the balances at the end of June and December1998 respectively.
Year 2000 Issue
Resolution of the Year 2000 issue remained one of the highest priorities amongst the operations of the Group. The Group began resolving the Year 2000 issue in early 1997, in order to ensure that the operations of the Group are not adversely affected by the failure of any computer system to process dates correctly before, into and beyond the Year 2000. The Group’s definition of year 2000 compliance is that all our critical processes continue to operate into the next century by demonstrating that every supporting information system will continue to function in the year 2000 and beyond. We have also taken steps to minimise Year 2000 risks arising from our major business partners and customers. All Year 2000 related activities are overseen by the Group’s Managing Director.
By the end of 1998 the Group had fixed and satisfactorily tested all critical and required non-critical IT systems, completing all work in line with the requirements of the Hong Kong Monetary Authority. In the first half of 1999 we participated in joint tests of local and international banking systems. Investigation of our counter-parties is largely complete with follow-up and monitoring action running close into the end of the year. We will make necessary process adjustments to take account of external Year 2000 risks.
The Group has prepared a contingency plan to ensure that the value of deposits and borrowings is not affected, and that the Group can continue to operate, in case Year 2000 problems occur. These plans have been rehearsed and demonstrated in life like tests.
The majority of the Group’s insurance does not exclude Year 2000 risks and no specific Year 2000 insurance has been procured. Our strategy is to avoid any problems at source.
The total cost of the Year 2000 programme is anticipated at HK$29 million. Expenditure incurred to the end of first half of 1999 is HK$24.7 million, and this equals the value of commitments made. A further HK$4 million is anticipated to be incurred to the completion of this Year 2000 programme.
