The Industrial and Commercial Bank of China (ICBC), the country's largest lender, announced a 9 percent increase in 2004 in loans granted, despite China's policies to cool down the heated economy.

A spokesman for the bank said Wednesday that newly-added loans reached 288.9 billion yuan (US$34.9 billion) last year. 

The bank restricted loans for overheated industries such as steel, cement and aluminum, copy-cat projects and projects that are not in line with industrial policies, do not meet conditions for market access, or would cause heavy pollution.

But at the same time it "actively" supported the "bottleneck" industries in the national economy, industrial giants, small and medium-sized enterprises with market potentiality and earning abilities and rational demand of individual consumers, the spokesman said.

The state's macro-economic control helped optimize the ICBC's loan structure, he said. The bank chalked up a roughly 20 percent year-on-year growth in operating profits in 2004, earning 74.7 billion yuan (US$9 billion).

Only 3.16 billion yuan (US$381.6 million) stayed on its book, with the major remaining part used to cover loan losses. As a result, the bank's outstanding non-performing loans (NPLs) plummeted by 17.1 billion yuan (US$2.1 billion) in the 12 months. By the year end its NPL ratio stood at 19 percent by the international standard, the spokesman said.

The bad debt proportion is still alarmingly high, compared with 1-2 percent of world famous banking giants, sparking anticipation that the Chinese government would inject hefty funds into it to bolster its capital base, in another bailout package to reform the key banking system.

President Jiang Jianqing of the bank revealed earlier that more than 90 percent of the bank's existing bad loans, however, came still from lending extended before 1999, the year in which China set up four special asset management companies to handle a combined 1.4 trillion yuan (US$169.1 billion) in NPLs transferred from state banks.

After then the bank's NPL ratio for newly-added loans was capped at just 1.6 percent, meaning the bank either recovered or wrote off nearly 5 billion yuan (US$603.9 million) in NPLs ona monthly average since 2000, he added.

China is in the midst of overhauling its banks, largely including the Big Four -- the ICBC, the Bank of China (BOC), the China Construction Bank (CCB) and the Agricultural Bank of China (ABC) -- ahead of the World Trade Organization-mandated opening of the financial market to foreign rivals by the end of 2006.

At the end of 2003 China poured a combined US$45 billion in foreign exchange reserves into the BOC and CCB to help replenish its capital.

The two are scheduled to go public this year, whereby they hope to streamline operation and sharpen competitive edges. At present, the BOC and CCB have introduced joint-stock systems and corporate governance including the establishment of a shareholders' meeting, board of directors, board of supervisors and senior management.

The ICBC has said it would seek public listing in 2006. Details of the plan are not available.

Separately, the bank announced last week its combined assets increased by 430 billion yuan (US$51.9 billion) in 2004.

The bank posted a 46 percent surge in income from intermediate business, such as bank card and bill business, to 11.5 billion yuan (US$1.4 billion) in the year.

This is eye-catching because Chinese banks traditionally resort to differentials between loan and deposit rates to make earnings, but for the ICBC, its intermediate business income has climbed to 14 percent of that from rate gaps. 

(Xinhua News Agency January 12, 2005)