Wing Hang Bank (0302) set aside seven times more money last year to cover bad loans - mainly for lending in Zhejiang province - which dragged its net income down 16 percent.
The lender said it earned HK$1.8 billion in 2012 compared with HK$2.15 billion the previous year.
Net interest income edged up 3 percent to HK$2.95 billion but impairment losses reached HK$236 million - compared with HK$29.8 million in 2011 - eating up 13 percent of net profit.
Chairman and chief executive Patrick Fung Yuk- bun said the charges were related to "a few loans made in northeastern Zhejiang province."
Fung said such lending will not become a trend for the bank as its main market in the mainland is the Pearl River Delta, not the northeast.
"Confirmed bad loans are only about HK$100 million, but we made an extra provision of HK$100 million to cover potential nonperforming loans," he said. The writedowns have led to a 76 percent drop in profit before tax of its mainland operation.
Several local banks have suffered a deterioration in their mainland lending.
Loan writedowns by the Bank of East Asia (0023) in China more than doubled, with problem loans also concentrated in Zhejiang.
Chong Hing Bank (1111), meanwhile, said net income fell 3 percent to HK$543 million.
Lau Wai-man, who yesterday replaced Liu Lit- chi to become Chong Hing Bank's first chief executive from outside the founding family, said the bank remains open for sale but had no updates.