Timothy Morano
Oct 07, 2024 07:25
The Hong Kong Mortgage Corporation Limited (HKMC) announces a notable drop in profit for H1 2024, attributing the decline to adverse property price impacts on its reverse mortgage business.
Summary of Financial Standing 📊
This year you will notice significant changes in the financial landscape of the Hong Kong Mortgage Corporation Limited (HKMC). An unaudited report reveals that they encountered a dramatic profit decline during the first half of 2024. Adjustments in the property market have heavily influenced their results, particularly in the reverse mortgage sector. As the figures show, HKMC’s profit after tax fell to HK$9 million, a staggering decrease from HK$1,175 million recorded in the same period last year. Such trends underscore the challenges faced by the institution in an evolving market.
Understanding Financial Results and Adjustments 🔍
When excluding various elements such as HKMC Annuity Limited’s performance and the effects of property price variations, the adjusted profit after tax stood at HK$468 million. This indicates an annualized return on equity of 6.2% and a cost-to-income ratio of 22.4%. In comparison to the previous year’s adjusted profit of HK$365 million, the current figures reflect a noticeable improvement in profitability metrics.
Despite reporting a loss in the accounting sense, the annuity sector holds a notable embedded value of approximately HK$14 billion as of June 30, 2024. Furthermore, the Capital Adequacy Ratio (CAR) sits at a comfortable 20.7%, comfortably surpassing the 8% minimum requirement set by the Financial Secretary. Solvency ratios for both HKMC Insurance Limited and HKMC Annuity Limited remained well above mandatory thresholds, emphasizing a strong financial posture.
Business Operations and Market Activity 📈
In the initial half of 2024, HKMC actively acquired HK$2.1 billion in loan assets and secured HK$4.6 billion in loans as part of the SME Financing Guarantee Scheme. By June 30, 2024, the overall balance of their loan portfolio had reached HK$107.1 billion.
Moreover, HKMC played a leading role in the Hong Kong dollar corporate bond market, issuing an impressive HK$57.1 billion in corporate debts. Among these, they set a record with HK$12 billion in triple-tranche HKD bonds. Their prudent activities were backed by solid credit ratings, with S&P Global Ratings and Moody’s offering ratings of AA+ and Aa3, respectively.
Mortgage and Guarantee Programs Overview 🏡
Throughout the first six months of 2024, the Mortgage Insurance Programme liberated HK$28.3 billion in new loans, primarily secured against properties in the secondary market. The SME Financing Guarantee Scheme approved over 66,900 applications, collectively amounting to approximately HK$143.2 billion in loans since its establishment.
Launched in 2023, the Dedicated 100% Loan Guarantee Schemes granted 220 applications worth HK$218.2 million by the middle of 2024. Additionally, the Reverse Mortgage Programme experienced heightened activity, with 546 applications approved, a remarkable increase from 277 in the same timeframe last year.
In light of prevailing market uncertainties, HKMC exhibits resilient core operations, bolstered by a cautious prefunding strategy and proactive engagement with investment communities. For those interested in further insights, detailed information is available in the comprehensive financial report on the official website.
Hot Take 🔥
The trajectory of HKMC’s financial performance this year provides an important case study of shifting market conditions and their impact on institutional profitability. The significant drop in profit illustrates how external factors like property prices can influence business operations. However, HKMC’s ability to maintain relatively healthy ratios and secure strong credit ratings depicts a sound strategy for navigating uncertainty. Continuous engagement and innovative measures will likely be crucial for their future growth and stability in the competitive financial landscape.
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