Bank of East Asia's loan growth hit 15.6% in 2013

Will it keep its momentum this year?

According to Maybank Kim Eng, Bank of East Asia's loan growth was 15.6% YoY in 2013. BEA will continue to expand cross-border trade finance, high-yield consumer finance and supply-chain finance in China.

Here's more:

We raise our loan growth forecast from 10-11% p.a. to 11-12% p.a. during 2014-15. NIM widened from 1.83% in 1H13 to 1.98% in 2H13, mainly driven by higher lending spread and better yield on interbank lending in China.

The expansion of its supply chain business should help absorb low cost deposit funding in China. We raise our NIM forecast from 1.87-1.88% to 1.95% for 2014-15.

Improving operating efficiency. Cost-income ratio improved from 57.7% in 2012 to 55.5% in 2013. BEA China will moderate the pace of outlet expansions (+13 outlets in 2013) and continue to relocate some of its branches from ground floor to upper floor in 2014.

We expect its cost- income to fall to 52-54% during 2014-15.

Higher-than-expected credit costs. Credit costs rose from 0.10% in 1H13 to 0.14% in 2H13 (0.05% in 2H12). This was mainly due to higher collective loan impairment charges and fewer loan loss recoveries. However, total NPLs in China increased by HKD134m HoH in 2H13.

This was related to commodity trading loans and some corporate loans outside Zhejiang and Fujian. We raise our credit cost forecast from 0.09% to 0.12% for 2014.