HKMC may buy mortgage assets from Shenzhen banks

Updated: 2011-04-13 07:04

By Oswald Chen (HK Edition)

Corporation looks to boost its profit as asset purchases, debt issuance lag

The government-controlled Hong Kong Mortgage Corporation (HKMC) said Tuesday that it is considering purchasing mortgage loan-backed assets from banks in Shenzhen to bolster its profits after reporting that its purchase of assets and debt issuance plunged in 2010 due to weak market demand.

Meanwhile, the HKMC also reported a 22.7 percent gain in net profit to HK$1.23 billion in 2010 from 2009, thanks to a favorable interest rate environment, excellent loan performance, prudent business development strategies and strong commitment to risk management.

The HKMC, established in 1997 by the government, is tasked with helping to boost the overall stability of the local banking sector through injecting liquidity into the system by purchasing assets from local banks. It is also tasked to boost wider homeownership by providing mortgage insurances to homebuyers, and to facilitate the growth of the local debt market and the mortgage-backed securities market through different bond issuance programs.

"We are still studying the feasibility of acquiring mortgage loan-backed assets from banks in Shenzhen, however this will depend on the willingness of the banks to sell the assets and the pace of regulatory progress on the mainland," CEO James Lau told media on Tuesday.

Lau added that if the HKMC decided to acquire Shenzhen banks' mortgage loan-backed assets, it may consider issuing yuan-denominated bonds in Hong Kong to finance the acquisitions.

The amount of assets purchased by the HKMC in 2010 fell 46.6 percent to HK$4.7 billion from 2009. Its outstanding loan portfolio also shrunk 19.4 percent to HK$35.3 billion at end-2010.

Its new debt issuance plummeted 63.4 percent to HK$8.3 billion in 2010 from the previous year while outstanding debts and mortgage-backed securities declined by 12.13 percent and 25 percent, respectively, to HK$39.1 billion and HK$1.5 billion.

Lau was confident that the amount of asset purchases may increase again in 2011 because of the buoyancy of the local economy.

"As more local banks are taking in more mortgage loans business, as well as banks having to consider bolstering their capital positions because of the Basel III capital requirements, I predict the amount of asset purchase by the HKMC in 2011 should be bigger than 2010," Lau said.

According to figures from the Hong Kong Monetary Authority, local banks' Hong Kong dollar loan-to-deposit ratio rose to 81 percent over the past year, reflecting the buoyancy of credit loan growth in the city.

China Daily

(HK Edition 04/13/2011 page3)