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Finance

Bank of East Asia boosts mainland retail lending amid internet finance curbs

Profit came surging back last year as mainland businesses turned around

HONG KONG -- Bank of East Asia looks to grow its consumer banking services in China, as competition eases thanks to Beijing's ongoing crackdown on internet financing.

The Hong Kong-based, family-run lender plans to double the size of its retail loan customer base on the mainland and raise its share of retail lending from 19% now to 30% by 2020, group management revealed on Thursday.

The proposed expansion comes after a marked improvement in the bank's mainland operations last year, which posted a profit of 318 million Hong Kong dollars ($40.6 million) after losing HK$462 million in 2016.

The bank also improved its asset quality during the period. Impairment losses on loans and receivables shrank to HK$2.76 billion from the year-earlier HK$4.31 billion, with the impaired loan ratio falling to 1.79% from 2.87%.

Over the past year, Chinese regulators have been tightening their grip on booming internet lending, as they fear the largely unregulated industry adds to the country's financial system risks. Reuters reported in November that Chinese regulators have urged local governments to suspend approval for new internet microlenders. Existing internet-based lenders were told to conduct "self inspections" to comply with regulations.

"We believe that would channel a lot of retail businesses that used to be covered by shadow banking back to the traditional banking system," said Brian Li Man-bun, the BEA's deputy chief executive, who is in charge of China operations. Last year, the bank's non-mortgage retail lending grew by more than 40% on the mainland.

To capture opportunities in China's 1.2 trillion yuan ($189 billion) internet finance sector, Li said BEA will continue to grow its online presence through partnerships and acquisitions, so it can make use of local partners' consumer data.

Its current mainland partner includes WeBank, whose major shareholder is internet group Tencent Holdings, and Ctrip.com International, one of the country's largest online travel agencies.

Rather than target big borrowers, Li said BEA's retail services will mainly focus on people aged between 25 and 35 who have "real consumer need." It will mostly offer loans within the range of 10,000 yuan to 20,000 yuan.

"We want to grow a very strong customer base. That's something we will be working on for the next few years," Li said.

One of the 100-year-old bank's priority regions on the mainland is the so-called Guangdong-Hong Kong-Macau Greater Bay Area, a cluster comprises 11 southern cities surrounding the Pearl River Delta, which is expected to rival San Francisco's Bay Area in economic scale.

The Hong Kong-based bank expects to open its first fully licensed securities branch on the mainland in Shenzhen's Qianhai free-trade zone,  providing financial services to companies in the area. Financial institutions registered outside of the mainland China are restricted from conducting full-licence securities services -- except in certain pilot economic zones like Qianhai designated by Beijing to attract investment.

But Li urged Hong Kong and mainland regulators to do more to remove policy hurdles and allow easy capital movement across the border.

"I think there is plenty of room for regulators on both sides to improve their co-ordination," he added.

Last year, the bank's profit from continuing operations jumped 79.7% to HK$6.3 billion, rebounding from two straight years of declines. A one-off gain of HK$3 billion from the sale of financial services unit Tricor Holdings Ltd and its subsidiaries helped lift the bottom line.

The company in the past year has prioritized asset quality over yields and volume when extending loans to rein in risks. However, with improvement of its asset quality, Li indicated its lending strategy will be more aggressive this year.

"For 2018, we focus more on the growth," Li said.

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