HANG Seng Bank Ltd, Hong Kong's second-largest lender by assets, yesterday posted an unexpected increase in first-half profit as income from loans and trading rose.

Net income climbed to HK$9.06 billion (US$1.16 billion), or HK$4.74 a share, from HK$8.87 billion, or HK$4.64 a share a year earlier, the bank said yesterday. That beat the median HK$8.77 billion estimate among five analysts surveyed by Bloomberg News.

Hang Seng Bank, 62 percent owned by HSBC Holdings Plc, overcame a cooling economy through more profitable lending and expanding in wealth management. The bank said Hong Kong and China's mainland would be "affected" by the slowing United States economy and accelerating global inflation.

Hang Seng Bank, which is incorporated in the mainlaNnd, last year booked a gain of HK$1.47 billion on its stake in China's Industrial Bank Co. Excluding that gain, profit jumped 23 percent, the company said yesterday.

Net interest income rose 23 percent to HK$8.25 billion, it said. Net fee and commission income rose 5.8 percent, and trading profit jumped 30 percent to HK$759 million.

Chief Executive Officer Raymond Or said in March that wealth management would be Hang Seng's "key growth driver" this year and added that he may increase investments in the mainland, the fastest-growing major economy.

Hang Seng Bank's outstanding loans expanded 9.3 percent to HK$338.2 billion as of June 30 from the end of last year. A slowdown in the property market may cause demand for credit to weaken during the rest of this year.

The number of residential units changing hands in Hong Kong fell 19 percent in July from a year earlier, the Land Registry said yesterday. Transactions tumbled 27 percent from June.

The city's retail sales growth slowed for a third straight month in June as a stock-market decline and higher inflation damped consumer sentiment.