Hong Kong's Hang Seng Bank posted a 6.2 per cent drop in its net profit for 2009, from HK$14.10 billion in the previous year to HK$13.22 billion ($1.7 billion).

The result was due mostly to a 14 per cent decline in its net interest income to HK$14.02 billion ($1.8 billion) and a drop in its net interest margin from 2.36 per cent to 1.9 per cent. Net fees and commissions, under which fall its securities brokerage and wealth management units, suffered from weak demand in the wake of the global crisis and dropped 13 per cent to HK$4.97 billion ($640 million). On the other hand, trading income went up 32 per cent to HK$1.92 billion ($247 million), partially offsetting some of losses from the banking side.

Low interest rates, fuelled by general weakness in the US, have spurred intense competition among Hong Kong-based banks who are now seeking to earn from non-interest related ventures, such as brokerage and wealth management. Hang Seng Bank said in a statement that it intends to realign its activities towards its wealth management units, especially those located in mainland China.

"The low interest rates are likely to persist until at least the second half of this year and keen competition in the financial sector will continue to put pressure on margins," cautioned Raymond Chien, the bank's chairman.

The bank has been making significant inroads into China over the past years and notes that its banking business in the country had, in fact, accounted for 13.3 per cent of its 2009 earnings, against just 11.9 per cent in the year before.

"On top of our investments in Industrial Bank and Yantai Bank, we are actively looking for strategic partners in the wealth management industry," said Margaret Leung, the bank's chief executive.

Hang Seng has 37 banking branches in 12 mainland Chinese cities. In Hong Kong, it has 220.