In terms of our business, non-interest income and net interest income were adversely affected by lower transaction volumes as commercial and personal banking customers stepped back from investment plans and spending activity. Low interest rates exerted growing pressure on the net interest margin. The weakened credit environment resulted in an overall increase in expected credit losses for the year and we recorded a net deficit on property revaluation, compared with a net surplus in 2019.
The combined impact of these factors affected our bottom line. Profit attributable to shareholders declined by 33% to HK$16,687m. Earnings per share were HK$8.36 per share. Return on average ordinary shareholders’ equity was 9.6%. Return on average total assets was 1.0%.
While the difficult operating conditions in 2020 made it a challenging year for financial performance, there is positive progress in terms of our long-term strategy.
Our proactive steps to continuously improve agility and resilience enabled us to smoothly engineer our operations to ensure customers enjoyed uninterrupted access to convenient, reliable and safe banking services amid the pandemic environment. In traditional Hang Seng fashion, our dynamic approach also made it possible for us to go the extra mile and continue to roll out new service innovations, develop new markets and offer support to those in need. These achievements, which were accomplished while maintaining strong cost control and effective risk management, have further enhanced Hang Seng’s institutional sustainability.
The Directors have declared a fourth interim dividend of HK$2.80 per share, bringing the total distribution for 2020 to HK$5.50 per share.
Economic Outlook
The near-term outlook for the global economy is closely tied to the world’s ability to bring COVID-19 under control. While the development of vaccines, along with continuing policy support from major central banks, offer some hope for general global economic recovery in the second half of 2021, it is likely that the impacts of the pandemic will continue to reverberate beyond the end of the acute phase of this worldwide crisis. While financial markets have shown some vibrancy since the second half of last year, many real-economy uncertainties remain.
Although Hong Kong recorded an economic contraction for the whole of 2020, there was a return to the path of expansion in the second half. Further growth is potentially within view with the continuation of supportive government policy initiatives and the improvement in financial markets resulting from monetary easing by the US Federal Reserve. The situation remains fragile, however, with much depending on external variables and it may be some time before economic activity returns to its pre-recession level.
Mainland China has had a head-start on recovery from the global health crisis. After seeing its GDP fall by an annual rate of 6.8% in the first quarter of 2020, the economy picked up to register modest growth for the full year. Thus far, industrial production and property investment have been the major drivers of growth. Consumers have been slower to return to ‘business as usual’, prompting the government to focus on boosting domestic demand in its recent economic strategy. We anticipate the Mainland economy will deliver growth in the range of 6% to 8% in 2021.
A Progressive Approach, A Sustainable Strategy
Following our AGM in May, I shall retire from my position as Chairman of Hang Seng’s Board of Directors after 13 years of service. I would like to express my gratitude to my fellow Board members for their support and wise counsel over the years, and to congratulate my successor, Ms Irene Lee. She knows the Bank’s business well, having been an Independent Non-executive Director of the Board since May 2014. I have no doubt that Irene’s deep experience and far-sighted vision will help lead Hang Seng to even greater success.
I also wish to express sincere thanks and profound appreciation to Hang Seng’s professional colleagues, past and present, for their unwavering determination, dedication and drive in executing our vision to provide innovative, best-in-class services to customers. I am extremely proud of what the Bank has achieved during my tenure as Chairman. We have strengthened our position as a market leader through a strategy of customer-centric innovation that combines the power of technology with the expertise and personal touch of our people.
This past year has been a strong test of the actions we have taken to build a business that is fit for the future and able to handle the challenges that lie ahead. We have shown ourselves to be responsive, adaptable and resilient, with the right infrastructure and culture to overcome difficulties and take advantage of new opportunities.
The pandemic has also reminded people around the world of the importance of community and of working together to overcome major societal challenges. Our deep roots in Hong Kong include a long history of initiatives to enhance local development and well-being. On this front too we are stepping up our actions, with the establishment last year of an ESG Steering Committee that reports to the Executive Committee and the Board, and a renewed commitment to helping to tackle issues that are specific to our community, as well as those that affect the entire planet, such as climate change.
For 88 years, the trusted Hang Seng brand has been built on the strengths and talent of its people, sound financial fundamentals and close community ties. The Bank will continue to grow with its progressive strategy, leveraging the best of technology and its more dynamic corporate culture to further encourage innovation and creativity, supporting customers and the community while providing long-term value for shareholders. It is a privilege to serve as Hang Seng’s Chairman and, from another vantage point, I look forward to being a lay cheerleader of Hang Seng Bank in the years to come.
Raymond Ch’ien
Chairman
23 February 2021
