The Mortgage Corporation and its subsidiaries recorded an unaudited profit after tax of $333 million in the first half of the year, $78 million less than the same period last year.

The annualised return on shareholders' equity was 11.6%. The capital-to-assets ratio remained strong at 9.3% at the end of June, above the minimum 5% stipulated by the Financial Secretary. The cost-to-income ratio was 15.1% for the first half year.

Releasing its half-year financial results today the corporation said it earned $927 million from interest income, while interest expense was $529 million, giving it a net interest income of $398 million.

Other income fell 88.7% to $21 million, mainly due to the change in fair value of financial instruments and rise in hedging costs amid volatile interest rates environment.

Other items included $65 million in net mortgage insurance premiums earned, $26 million of net gain on disposal of available-for-sale investments, $17 million of early prepayment fees arising from refinancing activities, $22 million of dividend income on investment securities and $2 million of exchange loss.

With the solid growth in secondary market activities new loans underwritten under the Mortgage Insurance Programme soared to $11 billion. The risk-in-force borne by the corporation rose to $4.7 billion as at June 30, up 34% on the end of last year. The net mortgage insurance premium earned grew 24% to $65 million.

Loan portfolio

The loan purchased amounted to $6.8 billion. Taking into account loan repayments and prepayments, the outstanding principal balance of the loan portfolio rose to $36.3 billion as at June 30, up 5.2% from $34.5 billion at the end of 2007.

The corporation continued to pursue prudent asset-liability management and pre-funding operations, and issued $17 billion in debt securities to fund loan purchase and refinance debts.

Due to continuing improvement in the jobless rate and borrowers' credit quality, a write-back of loan impairment allowance of $7 million was made. With its strong commitment to risk management the corporation did not buy any sub-prime mortgage loans or invest in sub-prime related products.

Total operating expenses were $63 million and the cost-to-income ratio was 15.1% for the first half of the year. The capital-to-assets ratio stood at a healthy level of 9.3% as at June 30.