III. China banking business
% of total assets: 25%
% of profit contribution: 30-35% (on normalized basis, excluding one-time items such as trading loss, write-off, etc.)
25% of customers are from strictly defined HK-based customers, however they contribute to majority of total earnings.
Asset mix (loan book) in China
Property development & construction loans: 12%
Mortgage: 7-9%
Property investement (shopping mall, etc.): 26%
Hotel: 7% (only 5-star)
Total hotel & property exposure: 50-55%
Wholesale and retail trade: 22%
Manufacturing: 9% (also a lot to do with exports)
Total exports related exposure: 30+%
BEA mgmt admitted the exports-related area is the most vulnerable given the worsening L/C market condition.
The current guidance of China loan growth is 35% for '08 and another 25% for '09. A lot of '09 growth is already built in the project pipeline - unless there is cancellation.
Loan-to-deposit ratio in China's operation, which was incorproated within China, is at 130%, down from previously 350%, and is expected to decline to 75% eventually. BEA is expanding deposit base in South China more aggressively since that's where it can find money, but it is lending more in North China.
My due diligence work indicated that BEA has the best management team among all the foreigner banks, which is a dramatic contrast to its HK operation, which many investors view as mediocre.