Hang Seng Bank reported strong full-year financial results for 2024, driven by sustained growth momentum and a 26% increase in non-interest income, reflecting its efforts to diversify revenue streams and expand its target customer base.

Despite a year of uncertainties, operating profit increased by 8% year-on-year (YoY) to HKD 21,558 million ($2,773 million). Profit before tax increased by more than HKD 900 million ($115 million) YoY. Earnings per share improved by 4% while return on shareholders’ equity remained steady at 11.3% compared to 2023. Total dividend distribution for 2024 was HKD 6.80 ($0.80) per share, an improvement of 4.6% YoY.

As a result of accelerating growth in the retail customer base both in Hong Kong and mainland China, the bank reported a 75% jump in new-to-bank affluent customers and a 15% increase in affluent customer numbers. New account openings for retail mainland China customers surged 81% YoY as integrated banking and wealth management services enhanced cross-boundary business.

Diana Cesar, executive director and chief executive of Hang Seng Bank, said: “2024 was a challenging year with geopolitical and macro uncertainties. But Hang Seng delivered a strong financial performance by focusing on diversifying our revenue and growing our target customer base. We also took a proactive approach to de-risk our portfolio, which enabled us to keep growing, and delivered notable results for our stakeholders. Going forward, we will continue to invest in our capabilities and support our community, which will fuel growth in a sustainable manner and contribute to Hong Kong’s position as an international financial centre and global super-connector.”

With economic uncertainties set to persist, Hang Seng continues to adopt a prudent and forward-looking risk management approach, which will provide a solid foundation for future growth.

Hang Seng Bank 2024 annual results

• Net interest income down 5% to HKD 30,784 million ($3,959 million) from HKD 32,295 million ($4,154 million) in 2023, with net interest margin narrowing by 10 basis points to 2.20% (2.30% in 2023).
• Non-interest income up 26% to HKD 10,753 million ($1,383 million) from HKD 8,527 million ($1,096 million) in 2023.
• Operating profit up 8% to HKD 21,558 million ($2,773 million) from HKD 19,946 million ($2,565 million) in 2023.
• Profit before tax up 5% to HKD 21,014 million ($2,703 million) from HKD 20,105 million ($2,586 million) in 2023.
• Profit attributable to shareholders up 3% to HKD 18,379 million ($2,364 million) from HKD 17,848 million ($2,295 million) in 2023.
• Earnings per share up 4% to HKD 9.33 ($1.20) per share from HKD 8.97 ($1.15) per share in 2023.
• Return on average ordinary shareholders’ equity of 11.3% (11.3% in 2023).
• Fourth interim dividend of HKD 3.20 ($0.41) per share.
• Total dividends up 4.6% to HKD 6.80 ($0.87) per share for 2024 from HKD 6.50 ($0.84) per share in 2023.
• Common equity tier 1 (CET1) capital ratio of 17.7%, tier 1 (T1) capital ratio of 19.4%, and total capital ratio of 20.8% at 31 December 2024 (CET1 capital ratio of 18.1%, T1 capital ratio of 19.9%, and total capital ratio of 21.4% at 31 December 2023).
• Cost efficiency ratio of 36.6% (35.8% in 2023).

Irene Lee, chairman said, "As the largest local bank in Hong Kong, the success of our business is inextricably linked to the complexities affecting the local economy. Last year we faced difficult challenges but also saw positive signs of resilience of Hong Kong."

Within this context, the bank strengthened its cross-boundary services to better meet the banking needs of retail and corporate customers. With new policies being introduced on both sides to stimulate economic development, the synergies of the Greater Bay Area are starting to be felt.

Concurrently, the bank is helping the city enhance its status as the super-connector between mainland China and the rest of the world. Hang Seng Investment Management Limited has partnered with Saudi Arabia's SAB Invest to enable investors in the Middle East to access Hong Kong's capital markets.

"Our commitment to improving the local community and contributing to its development has been evidenced through multiple initiatives including making available banking services to families in transitional housing. Additionally, many youth and education programmes have been launched focusing on financial literacy and inclusion. Improving awareness on fraud risks to protect our customers and their assets has also been a priority," Lee said.

Lee extended a warm welcome to Catherine Zhou, who was appointed as non-executive director with effect from October 2024. Currently Zhou brings with her expertise in digital transformation.

"On a final note, I wish to recognise the hard work of our colleagues who deliver exceptional customer service whilst bringing creativity and innovation to their jobs. They represent the best of everything that Hang Seng and Hong Kong stand for," Lee added.

Diana Cesar, executive director and chief executive, said,"As expected, 2024 was a difficult year with continued geopolitical and macro challenges. These led to slower economic growth and sluggish performance in the trade and retail sectors, which created a tough environment for local businesses.

"In response, we adapted our strategy to focus on diversifying our revenue and growing our targeted customer base. Combined with a proactive approach to de-risk our portfolio, we were able to deliver strong results and continue to grow," Cesar said.

More balanced revenue growth

The bank recorded a notable increase in non-interest income, in turn propelling decent growth in net operating income.

Interest rates started trending down since the third quarter of last year and against a market where loan demand remained subdued, net interest income was down 5%.

Nonetheless, the bank made significant progress in diversifying revenue, resulting in a 26% YoY increase in non-interest income, which more than offsets the decline in net interest income. This was mainly driven by strengthening the wealth management business, with income improving 22% YoY.

"We sustained a healthy net interest margin of 2.20%, as we continued to implement our robust asset and liability management strategy. Our affluent customer base recorded a 15% growth with new-to-bank affluent customers having increased 75% year-on-year," Cesar said.

Investment services income was up 28% and life insurance income increased 17% compared to last year. Hang Seng became the second largest life insurer by new business premiums with the same having grown by 80% as per the latest available figures.

Cross-boundary business with integrated banking and wealth management services also delivered positive results. New account opening for retail mainland China customers jumped by 81% YoY.

Operating profit increased 8% YoY. Profit before tax increased by more than HKD 900 million ($115.7 million). Earnings per share improved by 4% and return on average ordinary shareholders’ equity remained stable at 11.3%.

Proactively managing risk

As the largest domestic bank in Hong Kong, Hang Seng is closely tied to the local economy, supporting small and medium-sized enterprises (SMEs), as well as large corporates. Due to these close links, we share many of the challenges faced by these businesses. At the same time, preserving the long-term interests of stakeholders remains a priority.

The bank continues to adopt a prudent and forward-looking risk management approach.

Cash flow pressures for some of Hong Kong commercial real estate (HKCRE) borrowers continued because of the prolonged high interest rate environment. Non-performing loans for the year ended was at 6.12%, mainly driven by the HKCRE portfolio, as borrowers sought to defer payments. That said, twothirds of loans are secured by strong collateral. Asset quality of the unsecured book remains stable with over 90% at investment grade. As such, we have not seen a material impact on our financial performance. Expected credit loss (ECL) charges reduced by 24% YoY.

With regards to mainland China CRE, we continue to reduce our exposure. At year-end 2024, it accounted for around 2% of its total loan book.

We are satisfied that our proactive and decisive risk management approach on our Hong Kong portfolio provides us with a solid foundation which will better position us for future growth.

Investing for the future

Hang Seng has a history of more than 90 years during which time the bank has been evolving alongside Hong Kong and contributing to the city’s success. Going forward, we continue to invest in our capabilities and the community.

We are dedicating investments to upgrade our digital solutions and infrastructure. Our newly renovated main branch in Central features Future Banking 2.0 – a market-first ‘We Come to You’ service model which combines technology and the human touch. This improves servicing to our customers by enabling them to enjoy banking with the support of Smart Teller technology and other digital applications.

Financial inclusion and education through various community initiatives are also key priorities. We have developed programmes that improve financial skills, specifically for the city’s youth. We have also been supporting underprivileged families in transitional housing to enhance their awareness and habits on financial management.

Another major undertaking has been the launch of its HKD 33 billion ($4.2 billion) SME Power Up Fund which supports Hong Kong’s SMEs. Additionally, the HKD 80 billion ($10 billion) Sustainability Power Up Fund provides financial support to local enterprises on their green transition plans.

Outside of Hong Kong, Hang Seng Investment Management Limited collaborated with SAB Invest of Saudi Arabia to launch the SAB Invest Hang Seng ETF on the Saudi Exchange. This provides investors in the Middle East with direct access to Hong Kong’s capital market. It also helps enhance Hong Kong’s status as an international finance centre and a global super-connector.

Our dividends

Our continued business growth and strong capital position ensure we are well-placed to maintain a steady and healthy dividend policy.

I am pleased to announce that the directors have declared a fourth interim dividend of HKD 3.20 ($0.41) per share. This brings the total distribution for 2024 to HKD 6.80 ($0.87 ) per share, an improvement of 4.6% YoY.

Financial overview

The bank’s 2024 financial performance reflects the positive outcome of the efforts made to diversify the revenue stream, mainly on non-interest income. As a result, non-interest income grew by 26% to HKD 10,753 million ($1,383 million) and the proportion of non-interest income to net operating income improved from 21% in 2023 to 26% in 2024.

Net fee income increased by 8% to HKD 5,316 million ($683.9 million), aided by its continued strong performance in generating investment services income, mainly contributed by the growth in retail investment funds and securities broking and related services.

Net trading income, net income/(loss) from financial instruments designated at fair value through profit or loss, and changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss together recorded a gain of HKD 1,044 million ($134 million). This is in contrast to a loss of HKD 148 million ($19 million ) in 2023, and mainly reflects the higher revenue from derivatives products coupled with enhanced net interest income from trading positions and higher foreign exchange revenue generated from increased client activities.

Life insurance-related income also increased by 17% to HKD 3,119 million ($401 million), with higher revenue generated from insurance services.

On the other hand, net interest income decreased by 5% to HKD 30,784 million ($3,960 million), driven mainly by subdued loan demand on the back of the high interest rate environment, and the declining rates in the second half of 2024 (2H 2024).

Compared to 31 December 2023, gross loan balances decreased by 5% whilst customer deposits rose by 7%, primarily due to the growth in customer base mainly from new-to-bank affluent customers and mainland customers.

Net interest margin dropped 10-basis-points to 2.20% on the back of weaker loan demand where surplus liquidity has mainly been deployed into high-quality financial assets. Liquidity coverage ratio was 301.0% as at 31 December 2024.

Net operating income before change in ECL and other credit impairment charges grew by 2% to HKD 41,537 million ($5,343 million).

ECL and other credit impairment charges decreased by 24% to HKD 4,773 million ($614 million) due to the reduction in ECL charges for wholesale Stage 3 customers. As of 31 December 2024, gross impaired loans and advances as a percentage of gross loans and advances to customers was 6.12%, compared to 5.32% on 30 June 2024 and 2.83% on 31 December 2023.

Profit before tax increased by 5% YoY to HKD 21,014 million ($2,703 million). Attributable profit also rose by 3% to HKD 18,379 million ($2,364 million). Earnings per share grew by 4% to HKD 9.33 ($1.20) per share. Return on average ordinary shareholders’ equity remained stable at 11.3% for both years. Return on average total assets was 1.1%, up from 1.0% in 2023.

As of 31 December 2024, common equity tier 1 (CET1) capital ratio was 17.7%, tier 1 (T1) capital ratio was 19.4%, and total capital ratio was 20.8%.

In 2024, we continued to invest in people and technology to deliver greater operational efficiencies and enhanced customer experiences. We also made good progress in diversifying our revenue sources and building a strong capital base, which has helped support a good dividend payout. Looking ahead, we will continue, as always, to manage costs and risks in a robust manner so as to build a solid foundation that can deliver healthy and sustainable returns to shareholders.

The group has recorded a healthy improvement in financial performance, with a substantial increase in non-interest income, underscoring our dedication to broadening revenue sources, as net interest income came under growing pressure amid declining interest rates in the second half of 2024. Recent developments in credit conditions have also resulted in an increase in impaired loans and associated credit loss charges during the latter half of 2024. In light of these challenges, the group remains vigilant and is closely monitoring the prevailing interest rate outlook and continues to seek out opportunities, as the economy continues to expand at a moderate pace.

Net operating income before change in expected credit losses and other credit impairment charges was HKD 41,537 million ($5,343 million), up 2%. Non-interest income increased by 26%. This rise was partly offset by the 5% decrease in net interest income. Operating profit increased by 8% to HKD 21,558 million ($2,773 million). Profit before tax increased by 5% to HKD 21,014 million ($2,703 million) and profit attributable to shareholders was up by 3% at HKD 18,379 million ($2,364 million).

Net interest income decreased by HKD 1,511 million ($194 million), or 5%, to HKD 30,784 million ($3,960 million). Average interest-earning assets declined by HKD 9 billion ($1.15 billion), or 1%, to HKD 1,397 billion ($179 billion) due to subdued new loan demand at elevated interest rates throughout the year since 2023, partly offset by higher average balances in financial investments and interbank placements due to the redeployment of the commercial surplus. Net interest margin was down by 10 bps.to 2.20% attributable mainly to the narrowing of loan spreads on the back of weaker loan demand. Net interest spread reduced by 11 bps. to 1.78% while contribution from net-free funds increased by 1 bps. to 0.42%.

Net fee income increased by HKD 396 million ($50.9 million), or 8%, to HKD 5,316 million ($683 million), mainly contributed by a 39% increase in retail investment funds reflecting the strong fund sales, as a result of the launch of new capabilities to drive rigorous need-based wealth solutions. Income from securities broking-related services increased by 19%, reflecting the higher stock turnover in 2024.

Net income/(loss) from financial instruments measured at fair value through profit or loss decreased by HKD 3,649 million ($469 million), or 32%, to HKD 7,681 million ($988 million). Net trading income, net income/(loss) from financial instruments designated at fair value through profit or loss, and changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss together recorded a gain of HKD 1,044 million ($134 million) compared to a loss of HKD 148 million ($19 million) in 2023, mainly reflecting the higher revenue from derivatives products coupled with enhanced net interest income from trading positions and higher foreign exchange revenue generated from increased client activities.

Net income from assets and liabilities of the insurance business, including related derivatives, measured at fair value through profit or loss decreased by HKD 4,841 million ($622 million) to HKD 6,637 million ($853 million); mainly reflecting fair value losses on debt securities, as compared to gains in 2023 due to the opposite interest rate movement; the unfavourable impact was partially countered by the increased fair value gains on equity securities which back insurance contracts. More than 90% of the insurance businesses are accounted under the variable fee approach; as such, these fair value changes will be absorbed in the insurance contract liabilities through the line of insurance finance expense. Insurance service results showed an increase of HKD 222 million ($28.5 million), or 11%, to HKD 2,271 million ($292 million). This increase mainly reflected the higher release of Contractual Services Margin (CSM) due to growth of CSM balance propelled by new business growth and favourable economic variances.

Wealth management business income (mainly investment and insurance-related income) increased by HKD 1,241 million ($159 million), or 22%, to HKD 6,934 million ($892 million). The increase predominantly came from investment services income, contributed by the growth in retail investment funds, securities broking and related services, and structured investment products income, as a result of the bank's proactive approach towards pursuing cross-boundary business opportunities.

Change in expected credit losses and other credit impairment charges decreased by HKD 1,475 million ($189 million), or 24%, to HKD 4,773 million ($614 million) compared with 2023 mainly due to the reduction in ECL charges for wholesale Stage 3 customers by HKD 1,625 million ($209 million).

Change in ECL for Stage 1 and Stage 2 unimpaired credit exposures reduced by HKD 230 million ($29 million), reflecting the favourable change in the economic outlook in the retail portfolio.

Change in ECL for Stage 3 and purchased or originated credit-impaired exposures (impaired credit exposures) decreased by HKD 1,245 million ($160 million) to HKD 6,074 million ($781 million) compared with 2023, predominantly related to the reduction in ECL charges for mainland China CRE exposures.

Total change in ECL for wealth and personal banking decreased by HKD 228 million ($29.3 million) to HKD 577 million ($74 million). Commercial banking, global banking and global markets recorded reduced total change in ECL by HKD 1,247 million ($160 million) to HKD 4,196 million ($539 million).

Gross impaired loans and advances increased from HKD 24.7 billion ($3.17 billion) as at 31 December 2023 to HKD 51 billion ($6.5 billion) as at 31 December 2024. This change mainly reflects downgrades net of write-offs in certain impaired corporate loans. Gross impaired loans and advances, as a percentage of gross loans and advances to customers were 6.12% as of 31 December 2024, compared to 5.32% on 30 June 2024 and 2.83% at 31 December 2023.

Operating expenses increased by HKD 569 million ($73 million), or 4%, to HKD 15,193 million ($1,954 million), primarily due to the higher amortisation of intangible assets, staff costs and IT-related costs, reflecting our continuing investment in people and technology to deliver operational efficiencies and enhanced customer experiences.

Amortisation of intangible assets increased by 25%, related mainly to the development costs of capitalised IT systems to support business growth. IT-related costs also increased by 7%, as we continued to enhance our digital capabilities. Staff costs increased by 2%, primarily due to higher wages and salaries, performance-related pay and increased staff insurance premium to improve employee benefits.

The cost efficiency ratio slightly increased by 0.8 percentage points to 36.6%. Reflecting the uncertain property market, property revaluation decreased by HKD 549 million ($70 million), resulting in net deficit of HKD 583 million ($75 million). Share of profits of associates decreased by HKD 154 million to HKD 39 million, mainly reflecting the reduction of revaluation of a property investment company.

Re-disseminated by The Asian Banker