A resilient bank facing the challenges of the pandemic

Local banks’ operating profits fell 4.3% last year, but improved their performance by half compared to 2020.


It is true that operating profits of local banks fell by 4.3% to MOP 16.2 billion in 2021 compared to the previous year, interrupting a 12-year growth cycle and 10 consecutive years beating records from 2011.

However, half of the banks that presented public accounts improved their results, including five of the top six, according to data from the Macau Monetary Authority (AMCM).

As we can see in the table we present, which also includes 2020 and 2019 results, only ICBC was not able to surpass the performance of 2020.

It is relevant to note that very important banks in Macau, such as Bank of China and Tai Fung, improved their results compared to 2019 – that is, even the full two years of the pandemic did not. not prevent Macau’s two largest banks from expanding.

This batch also includes Luso International and Bank of Communications, which also show better performance (measured in net income) than in 2019.

31 banks (incorporated in Macao or outside Macao) presented their results in an official bulletin and 15 increased their profits compared to last year.

“The year 2021 has been fruitful,” said Benjamin San, president of the Local Monetary Authority (AMCM).

However, five banks closed deficit accounts (compared to three last year).

Two have remained in the red since 2019 (Ant Bank and Macao Development Bank) and three are new: DBS, Chong Hing and Sinopac.

In general, the banks concerned explain the results in the red with the reduction of interest income and services.

DBS, for example, reveals that it had interest income of MOP 22 million, which means a reduction of 37%, and other income for the year was MOP 9 million, which is also a reduction of 22% compared to the previous year.

But the main factor is indeed the epidemic, as Chong Hing Bank officials, for example, confess: “Given the constant influence of the epidemic in the world, Macau’s economy has suffered serious adversities, the economic and business environment showing instability and the unemployment rate is rising, which poses a serious challenge for business operations.

It should also be noted Hua Nan Bank, which had added losses in previous years and in 2021 managed to turn a profit, presenting 30 million MOP.

“The resilient financial sector has continued to play an important role in supporting the real economy during the pandemic,” wrote Benjamin San, in the AMCM’s annual report.

The beginnings of Haitong

Similar to what happened in 2020, with the entry into operation of the Macau branch of ICBC (it started operating in January of that year), 2021 has a new player: Haitong Bank.

Although it only officially started operations in October 2021, Haitong Group Bank made a net profit, after tax, of MOP 10.2 million.

Specializing mainly in the areas of debt capital markets and mergers and acquisitions, the Macau branch “also hopes to make important contributions to the development of the local bond market.”

“Despite the short period of activity in 2021, the Macau branch had the opportunity to join some international offshore debt syndicates of Chinese issuers, which allowed it to immediately attract market visibility. , and also to generate income”, reveals its financial director. report.

By the end of 2021, Haitong Bank’s net assets stood at MOP 60.2 million and total liabilities reached MOP 6.9 million.

During the year, Bank of China (Macau) Limited was also authorized to operate in Macao, carrying out retail banking activities, but its annual accounts are not published in the Official Gazette.

In May this year, the Managing Director extended the deadline for starting Bank of China (Macau) business to August 23, 2023.

It is therefore likely that next year will see the entry of at least one new player (see text on these pages).

Insight

Compared to the end of 2020, assets and liabilities recorded annual reductions of 13.8% and 16.6% respectively, while capital reserves increased by 1.0%.

At the end of 2021, deposits and current accounts amounted to MOP 149.9 billion, an increase of 16.4% compared to the balance at the end of 2020. It was mainly composed of time deposits denominated in foreign currencies, notably in HKD and USD with respective shares of 52.4% and 47.6%.

Investments in debt securities, which were mostly denominated in USD and HKD, were measured at fair value through profit or loss, according to AMCM. At the end of 2021, investments in debt securities reached MOP 64.3 billion, registering an annual decline of 10.7%.

The year-end level of the general reserve remained at MOP 5.3 billion, “reflecting the prudent policy continuously followed by the AMCM. In addition to responding to the volatility of the international financial markets, a reasonable level of reserves has been put in place to protect against possible financial losses induced by unforeseen market turbulence,” adds AMCM.


China Everbright Bank (Macau Branch)

Besides Bank of China (Macau) Limited coming into operation, Macau will also see the emergence of another new bank in operation in 2022.

In May, China Everbright Bank was authorized by the general manager to establish a local branch.

The branch named China Everbright Bank Company Limited Macau Branch was authorized to provide banking services, commercial enterprises, associations, foundations and public services.

Established in August 1992, China Everbright Bank is headquartered in Beijing and is a financial institution that was founded with the approval of the State Council and the People’s Bank of China.