Zhitong Finance App News, Dazhong Financial Holdings (00626) announced that the Group has assessed the impairment of goodwill with a book value of HK$1,964 billion on December 31, 2025, and expects to make full provision for the book value of goodwill.
Goodwill impairment has taken into account: since the third quarter of 2026, long-term interest rates in the market have risen sharply, leading to an upward adjustment in the discount rate used to assess goodwill; and because most of the Group's loan portfolios use fixed interest rates or refer to the Hong Kong dollar best interest rate pricing that usually remains stable throughout the interest rate period, affected by the adverse effects of rising market interest rates on the Group's capital costs and net interest spreads, the medium-term cash flow forecast needs to be adjusted downward.
After impairment of goodwill, the consolidated asset value and net asset value will simultaneously decrease by HK$1,964 million or approximately HK$1.8 per share.
Based on an assessment of the following: (i) the Group's most recent unaudited consolidated management accounts for the nine months ended September 30, 2026; (ii) projected financial performance for the fourth quarter of 2026, taking into account the effects of the aforementioned impairment of goodwill, changes in market interest rates on the Group's net interest income, changes in the market value of investment properties and impairment provisions in the loan portfolio; and (iii) other information known to the Board, the Group expects to record a loss after tax between HK$1.9 billion and HK$2 billion (profit warning) until 31 December 2026 Profit of HK$80 million after tax was recorded for the financial year ended 31 December 2025.
Goodwill impairment is a non-cash item and does not affect the Group's operating cash flow. It is also listed only at the group level and does not affect the financial status and compliance ratios of the Company's two main operating subsidiaries, namely Public Bank (Hong Kong) Limited (Public Bank (Hong Kong)) and Dazhong Finance Limited (Dazhong Finance).
The consolidated common equity Tier 1 capital ratio and total capital ratio of the Public Bank (Hong Kong) Group (including Public Bank (Hong Kong) and its main subsidiary Volkswagen Finance) were higher than 25.5% and 26.5%, respectively. The comprehensive liquidity maintenance ratio and core capital ratio of the Public Bank (Hong Kong) Group were above 60% and 150% respectively. The Group's capital and liquidity position continues to be strong and far exceeds regulatory requirements to meet its business and operating needs.