The unaudited profit after tax of the Mortgage Corporation and its subsidiaries was $464 million in the first six months of this year, 39% higher than the same period last year.

It said the increase was mainly due to significant loan purchases during the peak of the global financial crisis late last year and favourable interest rate conditions.

The annualised return on shareholders' equity was 15.6%. The capital-to-assets ratio remained strong at 9.6%, above the minimum 5% stipulated by the Financial Secretary. The cost-to-income ratio was 11.9%.

The loans purchased in the first half of this year amounted to $5.2 billion. Taking into account loan repayments and prepayments, the outstanding principal balance of the loan portfolio fell 7% to $47.2 billion.

The corporation has not purchased any sub-prime mortgages or invested in sub-prime related products.

Mortgage insurance coverage for new mortgage loans was $12.7 billion and the market penetration ratio was 32%.

The corporation issued a total of $12.4 billion in corporate debts in first half of this year, and remained the most active corporate debt issuer in the Hong Kong dollar debt market.

It said it is committed to promoting bond market development through regular debt issuance and product innovation such as the issue of $1 billion 15-year callable zero coupon bonds, the largest and longest so far in the local bond market.

The corporation's long-term foreign and local currency debt ratings are Aaa from Moody's and AA+ from Standard & Poor's.

A subsidiary, Bauhinia HKMC Corporation, was formed in June with the Shenzhen Financial Electronic Settlement Centre - an associated company of the People's Bank of China, Shenzhen Central Sub-branch - to offer mortgage-guarantee products.