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BOC Q4 profit plunges 58%, facing more costs
By Tony Munroe |
March 25, 2009, Wednesday
|
Print Edition
Print Edition
BANK of China, the country's largest foreign exchange lender, reported a 58-percent drop in fourth quarter earnings, weighed down by its overseas assets and exposure to recession-hit Hong Kong.
The bank and other mainland banks are expected to face margin pressure and higher credit costs this year, with industry watchers also predicting an increase in soured loans as slowing economic growth erodes asset quality.
The state-controlled lender posted net income of 4.5 billion yuan (US$659 million) from October to December, against 10.78 billion yuan a year earlier, lagging analysts' forecasts for 7.96 billion yuan, according to Reuters Estimates.
Full-year profit of 64.4 billion yuan was an increase of 14 percent from the 56.2 billion yuan earned a year earlier.
Big exposure
The bank, hardest-hit among mainland Chinese banks by its exposure to United States mortgage-related securities, booked impairment allowances against those holdings of US$4.46 billion.
Overall impairment losses on assets more than doubled for the year to 45 billion yuan, but its non-performing loan ratio improved to 2.65 percent for the year from 3.12 percent.
Its credit costs for the year rose, while net interest margins narrowed slightly to 2.63 percent from 2.76 percent.
Its overseas flagship, Bank of China (Hong Kong) Ltd, posted a second half loss of HK$3.75 billion (US$480 million), compared with net profit of HK$7.98 billion a year earlier.
Analysts polled by Reuters Estimates had expected BOC Hong Kong to post a second-half loss of HK$552 million.
For the full year, BOC Hong Kong's earnings plunged 78 percent to HK$3.34 billion, dragged down by US$1.52 billion in provisions on its securities investments.
BOC Hong Kong recommended no final dividend due to the earnings hit in the second half and the need to preserve capital.
Rise in NPLs
Royal Bank of Scotland said in a research note it expects that 4.5 percent of new loans made by Chinese mainland banks between 2005 and 2008 could become non-performing between the second half of 2008 and the end of 2010, higher than the 3.5 percent seen in the 2004-2005 downturn.
Mainland banks have made a flurry of new loans in recent months to support the government's stimulus measures to maintain economic growth at 8 percent or more.
Spared the worst of the global downturn thanks to a relatively strong domestic economy, China's three biggest listed banks - the Industrial and Commercial Bank of China, China Construction Bank and the Bank of China - are the world's three most valuable lenders.
The bank and other mainland banks are expected to face margin pressure and higher credit costs this year, with industry watchers also predicting an increase in soured loans as slowing economic growth erodes asset quality.
The state-controlled lender posted net income of 4.5 billion yuan (US$659 million) from October to December, against 10.78 billion yuan a year earlier, lagging analysts' forecasts for 7.96 billion yuan, according to Reuters Estimates.
Full-year profit of 64.4 billion yuan was an increase of 14 percent from the 56.2 billion yuan earned a year earlier.
Big exposure
The bank, hardest-hit among mainland Chinese banks by its exposure to United States mortgage-related securities, booked impairment allowances against those holdings of US$4.46 billion.
Overall impairment losses on assets more than doubled for the year to 45 billion yuan, but its non-performing loan ratio improved to 2.65 percent for the year from 3.12 percent.
Its credit costs for the year rose, while net interest margins narrowed slightly to 2.63 percent from 2.76 percent.
Its overseas flagship, Bank of China (Hong Kong) Ltd, posted a second half loss of HK$3.75 billion (US$480 million), compared with net profit of HK$7.98 billion a year earlier.
Analysts polled by Reuters Estimates had expected BOC Hong Kong to post a second-half loss of HK$552 million.
For the full year, BOC Hong Kong's earnings plunged 78 percent to HK$3.34 billion, dragged down by US$1.52 billion in provisions on its securities investments.
BOC Hong Kong recommended no final dividend due to the earnings hit in the second half and the need to preserve capital.
Rise in NPLs
Royal Bank of Scotland said in a research note it expects that 4.5 percent of new loans made by Chinese mainland banks between 2005 and 2008 could become non-performing between the second half of 2008 and the end of 2010, higher than the 3.5 percent seen in the 2004-2005 downturn.
Mainland banks have made a flurry of new loans in recent months to support the government's stimulus measures to maintain economic growth at 8 percent or more.
Spared the worst of the global downturn thanks to a relatively strong domestic economy, China's three biggest listed banks - the Industrial and Commercial Bank of China, China Construction Bank and the Bank of China - are the world's three most valuable lenders.
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