Dah Sing Financial Holdings Limited
ANNOUNCEMENT OF 1999 INTERIM RESULTS
The Directors of Dah Sing Financial Holdings Limited (the "Company") announce that the unaudited profit attributable to shareholders was HK$242.8 million for the six months ended 30th June 1999, up 6.2% from the HK$228.6 million for the same period in 1998.
Interim Dividend
The Directors have declared an interim dividend of HK$0.31 per share for 1999, up 3.3% from that paid in 1998. The dividend will be payable on or after Friday, 3rd September 1999 to shareholders on the Register of Shareholders at the close of business on Friday, 27th August 1999.
Closing of Register of Shareholders
The Register of Shareholders will be closed from Monday, 23rd August 1999 to Friday, 27th August 1999, both days inclusive. In order to qualify for the interim dividend, all transfers accompanied by the relevant share certificates must be lodged with the Company’s Registrars, Central Registration Hong Kong Limited, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong for registration not later than 4:00 p.m. on Friday, 20th August 1999.
Review of Business
After a difficult and volatile 1998, the local operating environment in the first half of 1999 improved slightly despite the continued recession, rise in unemployment and deflation. The steady easing in local interest rates, a recovery in stock prices and stabilization of property prices contributed to lift market sentiment and boost confidence in a gradual economic recovery.
Benefiting from the improving operating environment, the Group was able to generate a stronger operating performance relative to the first half of 1998. Operating profit before provisions was 54.8% higher than the same period in 1998, mainly attributable to a stronger revenue contribution from our banking business. Our life assurance business continued to post a good performance in an increasingly competitive market.
Net interest income grew 23.8% 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. A gain of HK$31 million arising from liquidating certain interest rate contracts in the period contributed to boost net interest income. Comparing with the 2.82% net interest margin reported for the first six months of 1998, this was raised to 3.45%, or 3.28% if the special gain is excluded, for the first half of 1999. This level of net interest margin is not expected to be sustainable.
Other operating income was 10.4% higher than that booked in the first six months of 1998, mainly reflecting a higher contribution from the banking business. Our life assurance business’ performance, valued using the embedded value accounting treatment, generated a profit of HK$44.4 million in the period, down 14.6% from the HK$52.0 million earned in the first half of 1998.
Operating expenses decreased 10.1% over the same period in 1998 as a result of the rigorous efforts taken since 1998 to trim our expense base and improve productivity. The favourable effect of rising income and lower expenses in the period led to a marked reduction in our cost to income ratio.
The Group’s 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 4.4% and increased by 7.9% respectively when compared with the balances at the end of June and December 1998 respectively. Total deposits at the end of June 1999, comprised of customers’ deposits and certificates of deposit, were up by 5.0% and 6.0% when compared with the balances at the end of June and December 1998 respectively. As China Construction Bank exercised its option to increase its shareholding in Jian Sing Bank ("JSB") from 40% to 70% in October 1998, JSB’s loans and deposits were still included in the consolidated balances of the Group at the end of June 1998. If these JSB’s loans and deposits were excluded, our Banking Group’s year-on-year growth would have been 1.5% for loans and 11.2% for deposits.
Our outlook of the second half of 1999 remains cautious against an environment of regional economic recovery and political uncertainty for several Asian countries. Despite the fact that the US interest rates rose by 0.25% at the end of June with a corresponding increase in the local discount rate, it is unlikely that Hong Kong interest rates will move substantially in the second half. The gradual recovery in the local economy, improvement in domestic consumption and unemployment, and a continuation of the downward adjustment in the cost base should be positive for our operations and performance.
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.
Board of Directors
On 3rd August 1999, Messrs. Tatsuo Maruyama and Masaharu Kumekawa resigned as a Vice Chairman and non-executive Director and a non-executive Director respectively of the Company, and Messrs. Yoshiki Kiyono and Hideki Iwakami ceased to be their alternates. Effective the same day, Mr. Noboru Katagiri, with Mr. Yoshiki Kiyono as his alternate, was appointed a non-executive Director of the Company. Additionally, Mr. Graham S. Long, succeeding Mr. Charles G. Toner, was confirmed as the alternate to Mr. Ian Harley.
Dealings in the Company’s Shares
There was no purchase, sale or redemption by the Company, or any of its subsidiaries, of the Company’s listed shares during the period ended 30th June 1999.
