Standard Chartered Bank will announce its first-half results this afternoon. Market estimates indicate that the bank's first-half performance could be better than its peers'. Bloomberg

Bank of East Asia (BEA) and Standard Chartered Bank (SCB) are due to deliver their first-half results today, and analysts expect strong growth for the latter but a profit decline for BEA.

Hong Kong banks have been good performers this year, with the exception of BEA, a Morgan Stanley analyst said in a research note.

Security houses forecast that the first-half profits of BEA likely declined between 6.3 and 20 percent, according to a survey by an agency.

Morgan Stanley has taken the most-negative stance, predicting the first-half net profits for BEA to decline 20 percent to HK$1.51 billion on more writedowns setting aside its collateralized debt obligation (CDO) and structured investment vehicle (SIV).

The house expects a HK$750 million mark-to-market (MTM) loss to be booked, and a total provision of HK$350 million for the first half.

Another driver of earnings disappointment will be equity gains on weak stock markets, and Morgan Stanley foresees BEA's trading gains dropping 12 percent to HK$350 million.

Credit Suisse is relatively neutral, predicting that BEA's net profits will be down 12.5 percent to HK$1.64 billion, and a further provision totaling HK$635 million will be made.

However, both Credit Suisse and Morgan Stanley said the growth in BEA's mainland business should have been strong.

"Loan growth should be especially strong for BEA, given strong growth in China," Morgan Stanley's analyst wrote. On the back of loan growth, Morgan Stanley estimates BEA's net interest income having jumped 29 percent to HK$3.56 billion.

Most Hong Kong-listed banks are due to release their half-year results this month, and Morgan Stanley said the key thing to watch out for in the results is any increase in non-performing loans (NPLs) or management commentary on asset quality. Looking forward, it said the credit costs might start rising from their current benign levels. "If the cycle turns, BEA and ICBC (Asia) are the most exposed," Morgan Stanley said.

Asia-focused lender SCB is also due to announce its first-half results this afternoon; market estimates indicate that the bank's first-half performance was possibly better than its peers.

The bank is expected to report a 21 percent rise in its first-half profit, according to a Reuters' survey.

SCB should provide brighter results after saying five weeks ago that it will post a "very strong" first-half.

Analysts said the bank had benefited from its exposure to fast-growing markets and had only modest writedowns on toxic assets, as well as strong growth in its wholesale arm.

Consumer banking has faced more headwind, and a potential cloud is the threat of inflation.

(HK Edition 08/05/2008 page3)