China Merchants Bank (CMB), the sixth biggest lender on the
Chinese mainland, reported a 13.4 percent yield after selling its
US mortgage-backed securities, according to Ma Weihua, president of
the bank.
Ma rejected media reports that the bank incurred a loss of 103
million yuan in the US subprime crisis? from its investment in
mortgage-backed securities, saying the bank sold the securities
last?August and has not been exposed to the US subprime
lending market since then.
The Hong Kong-listed bank bought its US mortgage-backed
securities in 2004 based on predictions that the US real estate
market would witness strong growth amid declining interest
rates.
The Chinese bank sold all the securities in August 2006, sensing
the potential risks in the investment because the US housing market
had boomed for two straight years, Ma said, adding that the bank
was happy with the 13.4 percent rate of returns.
Ma did not reveal the size of his bank's investment in the US
mortgage-backed securities, but the bank's interim report released
last Friday shows mortgage accounted for 77.5 percent of its retail
loans at the end of the said period.
The management holds that the bad loan ratio of the bank's
mortgage is quite low, according to Ma. He also made clear that the
bank has no outstanding loans to any financial institutions that
hold the US mortgage-backed securities.
Nevertheless, Ma said, the US subprime crisis had sounded the
alarm for Chinese banks and that CMB would adopt a more prudent
policy for its mortgage business.
The CMB said in the interim report that its net profit surged by
120.38 percent in the six months of the year to read 6.12 billion
yuan.
The bank attributed the substantial profit increase to the
steady growth of commercial loans, business expansion, assets
structure adjustment, a widening interest rate margin, and the
continuous rapid growth of non-interest business such as credit
card services, according to the statement.
The CMB was rated the best in the general category for its
popular dual-currency credit card, according to a survey conducted
by the Chinese credit card portal 51credit.com and Shanghai-based
poll firm 51poll.com earlier this year.
Two of the Big Four banks, however, have admitted to having been
affected by the subprime crisis though neither Bank of China nor
China Construction Bank has disclosed the extent of their exposure
to the subprime market, according to media reports.
The current crisis began as subprime mortgage defaults started
to spiral as a result of higher interest rates and the bursting of
the US housing bubble.?It has been dragging down world's major
stocks for weeks and making it difficult for the US and European
banks, which bought much of the repackaged subprime debts, to
resell it as its value dropped with serial defaults and
bankruptcies.?
Experts hold that the crisis has little impact on the Chinese
mainland because its exposure to the US subprime lending market is
relatively limited.
(Xinhua News Agency August 15, 2007)
