Dah Sing Financial Holdings Limited

ANNOUNCEMENT OF 1999 FINAL RESULTS


The Directors of Dah Sing Financial Holdings Limited (the "Company") announce that the audited results of the Company and its subsidiaries (the "Group") for the year ended 31st December 1999 are as follows:

Consolidated Profit and Loss Account
for the year ended 31st December



Notes:
  1. The Group adopted a new accounting policy on investments in securities to comply with the new Statement of Standard Accounting Practice no. 24 "Accounting for investment in securities" ("SSAP 24"). Dated debt securities intended to be held to maturity are accounted for as held-to-maturity securities, and are stated in the balance sheet at amortised cost less any provision for diminution in value. Investments in other than held-to-maturity securities are classified as either trading securities or non-trading securities. Both are stated at fair value in the balance sheet in accordance with the alternative treatment as defined in SSAP 24. Changes in fair value of trading securities are recognised in the profit and loss account as they arise. Changes in fair value of non-trading securities are taken to shareholders' funds until the security is sold, matures or is determined as impaired, at which time the relevant gain or loss is transferred from the investment revaluation reserve to the profit and loss account.

    The comparative amounts for 1998 have been restated, with the opening retained earnings for 1998 decreased by HK$5,553,000 to reflect changes in the Group's profit after taxation for periods prior to 1998, and a reduction of HK$3,941,000 in the Group's profit after taxation for the year ended 31st December 1998.

  2. The charge for bad and doubtful debts for the year comprises:

  3. Taxation

    1. Hong Kong profits tax has been provided at 16% (1998: 16%) on the estimated assessable profit for the year.

    2. Breakdown of taxation

      The Group's investments in limited partnerships are written off in the same year as the taxation benefits resulting from those investments are received and utilised.

    3. There is no significant deferred taxation liability not provided for.

  4. The calculation of basic earnings per share is based on earnings of HK$586,524,000 (1998: HK$252,074,000) and the weighted average number of 244,687,790 (1998: 242,607,742) shares in issue during the year. The calculation of diluted earnings per share is based on earnings of HK$586,524,000 (1998: HK$252,074,000) and the weighted average number of 245,047,054 (1998: 242,607,956) shares in issue during the year after adjusting for the effect of all dilutive potential ordinary shares.

Other Financial Indicators
Consolidated Balance Sheet



Financial Ratios



Additional Information on Advances to Customers and Other Accounts
as at 31st December


  1. Advances to customers and other accounts:

  2. Gross advances to customers by industry sector:

  3. The total advances on which interest is being placed in suspense or on which interest accrual has ceased:

  4. Overdue advances:

  5. Overdue advances are reconciled to non-accrual advances as follows:

  6. The amount of rescheduled advances (net of those which have been overdue for over three months and reported in Note (d) above):

Final Dividend

At the forthcoming annual general meeting of the Company to be held on Thursday, 27th April 2000, the Directors will propose a final dividend of HK$0.50 per share for 1999 to Shareholders whose names are on the Register of Shareholders as at close of business on 31st March 2000. Dividend warrants will be sent to Shareholders by ordinary mail on or about 2nd May 2000.

Together with the interim dividend of HK$0.31 per share, the total dividend for the year is HK$0.81 per share, up 35.0% from 1998.


Closing of Register of Shareholders

The Register of Shareholders will be closed from Monday, 27th March 2000 to Friday, 31st March 2000, both days inclusive. In order to qualify for the final 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, 24th March 2000.


Review of Business

After a difficult 1998, the operating environment in 1999 improved resulting in a gradual GDP recovery from mid year. With lower interest rates, the stabilization of property prices, a rise in domestic consumption and easing in unemployment, our economy worked its way out of the recession triggered by the 1997 Asian financial turmoil.

Benefiting from the improving operating environment, the Group was able to achieve a very respectable performance in 1999, generating a stronger profitability relative to 1998. Operating profit before provisions was 59.8% higher, mainly through a stronger revenue contribution from our banking business. Our life assurance business also continued to post a good performance in a difficult and increasingly competitive market.

Net interest income grew 37.7% in the year as a result of a higher net interest margin brought about by the wider spread between average Prime rate and interbank interest rates, growth in our higher yielding lending, and a reduced funding cost assisted in part by the easing in local interbank interest rates. Our Banking Group's net interest margin in 1999 was 3.37%, up from 1998's 2.62% and was back to the level achieved in 1997 prior to the financial crisis.

Other operating income was 11.5% higher than 1998, reflecting growth in both banking and life assurance businesses. The increase in the banking business' fee and commission income was driven by stronger credit card income, the servicing fees from securitized and sold mortgages, and a higher private banking contribution. Our life assurance business' performance, using the embedded value accounting treatment, generated a profit of HK$115.6 million in the year, up 16.5% from the HK$99.2 million earned in 1998. Partly offsetting the stronger fee income was a lower contribution from foreign exchange and securities dealing.

Operating expenses increased 0.6% relative to 1998. This reflected our effort taken in the past two years to trim our expense base and improve productivity, and increase our investment in information technology (IT) to support our business growth.

On 30th December 1999, the Group's main banking subsidiary Dah Sing Bank entered into a data centre outsourcing agreement with IBM by outsourcing the Group's data centre operation to the latter for a 7-year period. This arrangement is expected to bring meaningful saving in our IT expenses, an improvement in our system performance and contribute to an enhancement in our services to customers. This is a part of our long-term strategy to upgrade the efficiency of our services.

The Group's charge for bad and doubtful debts was 59.3% higher in the year, reflecting the Group's prudent provisioning practice. Due to the general credit contraction in the local market and depressed cash flow of some of our customers, our specific provision charge was 42.3% higher relative to 1998. Our loan book growth in 1999 led to a rise in general provision in the year.

For our Banking Group, total loans and advances to customers net of provisions were 9.9% higher when compared with the 1998 year-end balance. Total deposits, comprised of customers' deposits and certificates of deposit, were up by 9.4% relative to 1998. Our loan to deposit ratio of 72.2% was similar to the level in 1998. An average liquidity ratio of 47.1% was maintained in 1999.

Our life assurance business achieved a respectable performance in a difficult and highly competitive year. Although its operating results were slightly below that of 1998 due to flat premium growth in the sales of new policies and fall in the persistency of the policies in force for part of the year, a stronger performance generated from investment helped boost the business' net profit and sustained its record of continuous year-on-year profit growth.

Our 1998 performance was significantly and negatively affected by the dramatic fall in local property prices, with a total revaluation deficit of HK$182.9 million charged to our profit in that year booked under "Loss from disposal/revaluation of fixed assets". The annual revaluation of investment properties in 1999 revealed that the market value of some of our investment properties continued to drop in the year, resulting in another HK$16.4 million deficit charged to our profit in 1999.

We made substantial progress in developing our e-banking infrastructure and technology in the second half of 1999. We have already developed our "www.dahsing.com" web site as another distribution channel to promote our banking business and acquire new customers. The site provides a range of e-banking services, including online credit card and personal loan applications, mortgage valuation, foreign exchange and deposit rate quotes, and online insurance application. We are the first and the only provider so far for automatic add-value for the Octopus debit cards if the cardholders have a credit card or deposit account with us. We set up our WAP (Wireless Application Protocol) site in December 1999 and are offering updated product news, real-time financial information and financial modelling tools to our WAP mobile phone customers.

Furthermore we are considering the establishment of a standalone e-bank in a move to become one of the first financial service providers in Hong Kong to set up an e-bank. We are in the early stages of developing our business plan to support such an initiative and the processes required to set up a standalone bank. Discussions have been held with the Hong Kong Monetary Authority, whose approval will be required, and although we can offer no details on timing for the introduction of such a bank, it is our intention to utilize the full bank licence currently attached to our Hong Kong private bank, D.A.H. Private Bank Limited, to found the e-bank. The private bank operation will be absorbed into the banking activities of Dah Sing Bank and expanded. All existing customers of both our Hong Kong and Channel Islands private banks, the latter remaining unchanged, will be fully informed and their business protected when these changes are implemented.


Year 2000 Compliance

The Group satisfactorily addressed all Year 2000 risks and achieved Year 2000 compliance in 1999. Our IT systems continued to operate smoothly during the century turn without encountering any Year 2000 issue. The actual total spending since 1997 on the Year 2000 programme was HK$26 million.


Prospects and Plan For 2000

We believe 2000 will be another challenging year for Hong Kong and the financial services industry. A rise in interest rates will exert pressure on economic recovery and loan demand, and the ample liquidity in the local banking system will lead to keener competition for high quality assets like residential mortgages. Minimizing the adverse impact to our net interest margin will be one of our key targets in 2000.

We are optimistic about the improvement in local economic performance and anticipate our loan asset quality will continue to improve. Hong Kong is expected to benefit from China's anticipated accession to the WTO later this year and its continued economic reform. Our Group is well positioned to gain from the improving fundamentals and have formulated plans to accelerate our business growth and increase our profitability, with a keen eye on the importance technology will play in this respect.

In 1999, the Group participated in a joint venture together with another 9 local banks to form a trustee and administration consortium company, The Bank Consortium Trust Company, for developing and supporting the new Mandatory Provident Fund ("MPF") business which is targeted to be up and running in December this year. With our franchise in serving different types of companies and their employees, we expect to capture a reasonable market share in this new business and hope to develop this new niche business to complement our existing banking and insurance businesses


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 year ended 31st December 1999.



Hong Kong, Monday, 6th March 2000




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