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Hang Seng Bank 2017 net profit up 23%, beats estimates

Hang Seng Bank Ltd.'s net profit rose 23% year over year for 2017, driven by continued growth in lending as well as higher income from foreign exchange and derivatives trading.

The bank said consolidated profit attributable to shareholders rose to HK$20.02 billion, or HK$10.3 per share, from HK$16.21 billion, or HK$8.3 per share, in 2016. The S&P Capital IQ consensus mean estimates for normalized and GAAP EPS were both HK$9.94 per share.

Net interest income for the year increased to HK$24.58 billion from HK$22.25 billion, with net interest margin improving to 1.94% from 1.85%. Net fee income climbed to HK$6.76 billion from HK$5.94 billion for 2016.

Net trading income jumped 41% year over year to HK$2.38 billion from HK$1.69 billion, as foreign exchange income grew on the back of a rise in customer activity and higher income from funding swaps. The bank also said there was a revaluation gain on cross-currency swaps supporting life insurance contracts compared with a revaluation loss for 2016.

Total operating income rose to HK$50.08 billion from HK$44.13 billion, while net operating income increased to HK$34.32 billion from HK$29.29 billion. Operating profit climbed to HK$23.55 billion from HK$19.03 billion.

Loan impairment charges and other credit risk provisions declined to HK$1.04 billion from HK$1.31 billion. The bank's gross impaired loans and advances ratio was 0.24% as of Dec. 31, 2017, down from 0.46% a year ago.

As of Dec. 31, 2017, the bank's consolidated total capital ratio was 20.1%, down from 20.8% at Dec. 31, 2016. Its common equity Tier 1 and Tier 1 ratios were 16.5% and 17.7%, respectively, down from 16.6% and 17.9%, respectively, as of the end of 2016.

The company's board declared a fourth interim dividend of HK$3.10 per share, up from HK$2.80 per share in the prior-year period. Including three interim dividends for the first three quarters of 2017, the total distribution for the year is HK$6.70, compared to HK$6.10 for 2016.

The dividend will be paid on March 23 to shareholders on record as of March 7.

Hang Seng Bank is 62.14%-owned by HSBC Holdings Plc, which has also released its 2017 results.