HONG KONG -- Bank of East Asia ended higher for the first time in three days on Monday, buoyed by the overall market updraft stemming from gains in U.S. and European bourses at the end of last week.
The major Hong Kong lender rose 2.44% to 23.10 Hong Kong dollars ($2.97), up HK$0.55 from Friday's closing price. During the Monday lunch hour here, the bank announced a drop in net profit for the year ended in December that was in line with market expectations.
U.S. hedge fund Elliot Management had advised the lender to put itself up for sale, but the family-owned bank, in which Japan's Sumitomo Mitsui Banking Corp. holds a roughly 17% stake, rejected that advice on Monday. BEA's stock price rebound Monday was seen by some as a sign that investors supported the bank's decision.
BEA's net profit for the year through December fell 17% to HK$5.52 billion. Net interest income declined 6% to HK$11.93 billion, while noninterest income dipped 1% to HK$4.09 billion. The bank's Chinese operations have been hit by higher costs and shrinking interest rate margins, following rate cuts by the People's Bank of China. As the business environment is not expected to improve anytime soon, holding down costs will be its top priority, BEA noted.
In a letter published Feb. 4, Elliot urged BEA's management to consider putting the bank up for sale at HK$60 per share. "Given the current challenging macroeconomic and operating environment, as well as the business initiatives that are underway, now is a poor time to contemplate a sale," the bank said in a statement Monday. It went on to say that the best way to benefit shareholders will be to develop and improve the business.