Bank of China yesterday reported the slowest interim profit growth among listed Chinese banks as it fell victim to the United States subprime mortgage crisis and bigger overseas assets holding.
Net income at the bank rose 43 percent to 42.2 billion yuan (US$6.2 billion) in the first half based on international accounting standard, the Beijing-based bank said yesterday. It, however, marked the slowest profit growth among 14 listed Chinese banks.
China's 13 other publicly traded banks reported 96 percent average profit growth in the period.
Its peers have done well though. Industrial and Commercial Bank of China made a profit surge of 57 percent to shore it up as the world's most profitable bank. China Construction Bank recorded a profit growth of 71 percent.
While most of its Chinese rivals dodged the impact of the US subprime crisis, BOC is the hardest hit among them due to its higher US assets exposure.
Bank of China's impairment allowance on subprime mortgage securities total US$1.9 billion in the end of June, up from US$1.5 billion at the end of March, the bank said.
The bank reduced subprime-related holdings to US$3.64 billion as of June 30 from US$4.4 billion three months earlier.
The carrying value of debt securities issued by US mortgage financiers Freddie Mac and Fannie Mae held by BOC stood at US$7.5 billion as of August 25, down from US$10.64 billion at the end of June.
The fast appreciation of yuan in the first half, a 6.5 percent against the greenback, also cast shadow on the biggest foreign currency bank of China .
"We have more than 30 percent of foreign currency assets, far higher than the industry's average of 8 percent in China ," the bank said in a statement yesterday. "The interest rate cuts in Hong Kong and the United States made it hard to prevent our foreign currency assets from losing value."
The domestic one-year deposit margin sat at 3.33 percent, while the US counterpart sits at 1.5 percent, the bank said. The bank's interest margin in the first half inched up 6 basis points to 2.72 percent.
Its net interest income climbed 14.8 percent to 81.52 billion yuan. The doubling non-interest income of 37.3 billion yuan helped to bolster its bottom line.
Its capital adequacy ratio, the main gauge of financial strength, increased to 13.78 percent from 13.34 percent a year ago. The regulatory minimum is 8 percent.
The bad loan ratio decreased to 2.69 percent at the end of June, down from 3.17 percent a year ago.
Bank of China operates 689 outlets overseas, six times more than ICBC.
The bank ended at 3.65 yuan, up 0.83 percent, while the benchmark Shanghai Composite Index, which edged up 0.34 percent to 2,350.14.
(Shanghai Daily August 29, 2008)
