The Agricultural Bank of China will benefit from a cash
injection by China's finance ministry, which will help it offload
some of its bad loans and will see the ministry become a
shareholder of China's biggest deposit-taking institution, bank
President Yang Mingsheng revealed.
"The financial audit will be completed this year," Yang
announced yesterday at the annual session of the?National People's
Congress (NPC)?in Beijing. "The government will
determine the precise bailout amount following the audit's results.
The finance ministry will then inject funds and become a
shareholder."
A bailout of the Agricultural Bank, currently impaired by US$95
billion worth of bad loans, could mean an investment of over US$140
billion by the government to cover the Chinese central bank's eight
percent minimum capital adequacy requirement. China's government
vies to support the Agricultural Bank for its services to China's
800 million farmers this year, after closing 24,000 outlets since
2000 and paring its work force by 170,000 jobs, the bank Vice
President Han Zhongqi said on February 1.
Founded in 1979, the bank's primary remit was lending to
farmers. As of January, its bank branches accounted for 18 percent
of the country's bank branches, mainly due to a strong presence
among villages in China's interior and west.
The bank's network of 24,900 outlets dwarfs the Bank of China's
by 2.7 times, while its 452,000-strong workforce outnumbers the
Industrial and Commercial Bank of China's staff size by 100,000
employees, according to Bloomberg News.
Over 60 percent of Agricultural Bank's outlets are in rural
areas, which do not make a major impact on its profits. However,
the Beijing-based bank still ranked as China's biggest
deposit-taking financial institution last year, with savings rising
by 17.3 percent, or by 700 billion yuan (US$90.4 billion),
according to the bank's statements.
The bank also marked a 37 percent operating profit jump last
year, coming in at a record 58.1 billion yuan (US$7.5
billion)?after reducing its bad loans by 4.2 billion yuan
(US$542 million).
(Shanghai Daily March 12, 2007)