Bank of East Asia Ltd (BEA) - the Hong Kong lender targeted by billionaire Paul Singer's Elliott Management - has rejected a call by the hedge-fund firm to consider selling itself even after posting a bigger-than-expected profit drop.

Instead, the bank intends to focus on improving and executing on what it already has, according to a BEA statement filed with the Hong Kong Stock Exchange on Monday. That includes mainland operations, which the lender said are "severely challenged" in a separate statement that outlined a 17-percent decline in full-year profit, higher bad loans on the mainland and a hiring freeze.

"Given the current challenging macroeconomic and operating environment, as well as the business initiatives that are under way, now is a poor time to contemplate a sale," BEA said.

In a letter to fellow shareholders earlier this month, Elliott urged BEA to explore a sale of the company "at an appropriate premium". Previous bids for Hong Kong banks have been priced at an average of two times book value, which for BEA would equal about HK$60 a share, according to the hedge-fund firm, which holds a 7-percent stake in the lender.

BEA shares gained 2.44 percent to close at HK$23.1 in Hong Kong on Monday, compared with its 2.9-percent gain as of Hong Kong's trading break, during which the bank's statements were released. The stock has slumped 22 percent in the past six months. The Hang Seng Index gained 3.27 percent.

In its letter earlier this month, Elliott said BEA should now focus on delivering "proper value" for stockholders after blaming an "entrenched executive management" for mismanaging the business.

"With Elliot pushing BEA to sell itself, well, good luck with that," said Andrew Clarke, Hong Kong-based director of trading at Mirabaud Asia. "Even if a buyer was remotely interested, in the current environment two times book is very punchy."

Separately, BEA reported a 17-percent decline in 2015 profit to HK$5.52 billion ($709 million), which missed the HK$6.03 billion average estimate of three analysts surveyed by Bloomberg. The bank and NWS Holdings also said they're reviewing their investment in Tricor Holdings, which may result in a sale of the provider of business and investor services.

Net profit after tax for BEA's mainland business tumbled 81 percent in 2015 from a year earlier, according to its earnings statement. Among Hong Kong banks, the lender is the most exposed to the mainland, where economic growth is slowing.

David Li Kwok-po, BEA's chairman and chief executive, flagged cost control as "a top priority" because the bank doesn't expect a "material improvement" in the business environment.

Bank of East Asia nudges into improving its operation and profitability due to its unflattering performance and mounting economic uncertainties. Xaume Olleros / Bloomberg

(HK Edition 02/16/2016 page9)