The head of Hong Kong's third largest lender, Bank of China Hong Kong (BOC Hong Kong), announced strong half-year profits yesterday and said recent scandals involving senior board members will not reoccur, according to Friday's China Daily.

The Chief Executive, He Guangbei said the recent scandal involving two deputy chief executives, who made personal use of off-balance sheet funds, would not happen again as the group has enhanced its internal control system after listing.

He was speaking after the BOC Hong Kong posted a robust interim net profit surge of 85 per cent, beating the market estimation at 51 per cent.

BOC Hong Kong recorded a HK$5.58 billion (US$715.5 million) net profit in the first half of this year compared with HK$3.01 billion (US$386.2 million) a year earlier, outperforming the market forecast of HK$4.54 billion (US$582.1 million).

The bank said its earnings per share rose to HK$0.5279, representing an 85.29 per cent increase over last year. The board declared an interim dividend of HK$0.32 per share.

BOC Hong Kong's net interest income fell 16 per cent to HK$5.5 billion (US$706.3 million) as low interest rates squeezed gains from lending.

To offset the decline, Hong Kong banks have been promoting their wealth management and insurance services to generate income. BOC Hong Kong said its fees and commissions from similar promotions rose 24 per cent to HK$1.71 billion (US$219.2 million).

Meanwhile, the bank recorded a write-back provision of HK$1.24 billion (US$159 million), with a non-performing loan ratio for the first half dropping to 4.11 per cent from 7.8 per cent in the same period of last year.

During yesterday's media briefing, He was quizzed about the recent corruption scandal involving the group's top management members.

"BOC Hong Kong has improved its internal control system since its listing. The probability for a recurrence of rules-breaching events should be reduced and currently no new troubles are seen arising from the past events," He said.

"Our group will conduct an open, competitive and global recruitment process to fill the senior positions."

Responding to suggestions that the rules-breaching actions stemmed from the gap in emoluments and benefits between corporate management in the mainland and Hong Kong, He admitted there is a difference between the pay systems.

But the group's board has fully investigated the problems and is willing to undertake reforms, he said, adding BOC Hong Kong would adopt "corporate governance" to improve group management.

Improvement in its financial mechanism to ensure it operated close to the Hong Kong or international system would be made first.

The recruitment process for mid to top management members will come under focus to ensure it is meeting international requirements measures needed for the group to maintain a healthy and secure development.

He said BOC Hong Kong currently has a total of 13,009 employees.

The group has no redundancy plans, saying the environment was right for "a large institution like the group to shed its payroll by a hundred or so," as similar events are taking place in other banks in Hong Kong, said He.

Looking forward, He said his group would continue to focus on developing its franchise in retail banking, particularly wealth management, growing trade finance and small-medium enterprise business.

"We will maintain the momentum in China-related business and foster our leadership in personal renminbi business." He said.

Even though China-related business is the core source of BOC Hong Kong's earning, the group would take an "extremely cautious attitude towards the mainland business development."

"Our management group is facing a big challenge and much pressure. This is not a easy job to do, but we are confident that we can handle current issues," He said.

Furthermore, Hong Kong's Chief Financial Secretary Henry Tang said yesterday that the BOC Hong Kong incident would not affect Hong Kong's image as an international financial centre.

Tang said Hong Kong has first-class regulatory agencies, the system is transparent and they enforce their regulations rigorously.

"We will continue to enhance the standard of our regulatory agencies and also the standard of corporate governance, as well as other issues that are associated with or part and parcel of an international financial centre," said Tang.

BOC Hong Kong's share jumped 3.1 per cent, ending at HK$13.3 yesterday.

Source: China Daily