HONG KONG -- The Bank of East Asia, a Hong Kong mainstay with a 100-year history, has decided to fully embrace the digital age to complement the extensive streamlining of bricks-and-mortar banking.
At a typical BEA location in a Hong Kong shopping center, business is conducted paperlessly. Instead of handing out fliers, bank employees standing behind counters show customers the lineup of financial products using touch screens and other smart devices.
In 2015, BEA embarked on slimming down all 70 locations by a total of 20%, and finished the job at the end of last year. The work was made easier by the number of bank branches situated in malls and other retail spaces.
The project paid off quickly as black ink consistently rose from the nadir recorded in 2016. BEA turned in Wednesday an adjusted net profit of 3.6 billion Hong Kong dollars ($458 million) for the first half, up 24% from a year earlier.
"All branches in Hong Kong are now equipped with state-of-the-art digital access," drawing new customers, Chairman and CEO David Li said while announcing earnings.
Deputy CEO Adrian Li, David Li's son, said BEA will pursue the strategy of omnichannel retail banking, which integrates physical banking with the web.
BEA feels the pressure to modernize within one of Asia's biggest financial hubs, which is saturated with nearly 200 banks. BEA is the biggest locally owned bank in the city, and is strong with retail customers, along with small- to mid-volume clients. But among all banks operating in Hong Kong, it is ranked sixth in terms of total assets.
During the period under U.K. control, Hong Kong's role was as a gateway between China and the rest of the world. Because of that history, traditional financial institutions hold much of the sway, and financial technology, or fintech, has lagged somewhat in Hong Kong compared with the mainland.
BEA said Wednesday it is spending HK$3 billion over the next three years on IT including artificial intelligence and cybersecurity. The bank has already forged mainland partnerships with WeBank, a virtual banking affiliate of Chinese tech behemoth Tencent Holdings. BEA offers personal loans to WeBank's client base
BEA is also collaborating with Chinese online travel booker Ctrip to jointly issue credit cards. The two tie-ups have achieved a level of success.
The Hong Kong Monetary Authority is set to issue the first virtual banking licenses this year at the soonest, and BEA plans to apply for one. Virtual banking gives customers more choices, the younger Li said.
Along with the pivot toward digital innovations, BEA is plotting a new push to develop the mainland market. BEA holds one of the largest networks inside China among non-mainland operators. Beijing considers Hong Kong and the neighboring Guangdong Province as one economic sphere, and BEA is on the lookout for business opportunities there. BEA will also bolster its private banking business aimed at wealthy clients.
But observers are wary about BEA's renewed focus on the mainland due to its history of amassing bad debt in that market. In May, Fitch Ratings downgraded the assessment of Hong Kong banks' operating environment, citing the "growing influence of the links between the territory and mainland China."