BOC to take steps to raise CAR
By Michael Wei and Kelvin Soh |
March 24, 2010, Wednesday
|
Print Edition
Print Edition
THE Bank of China, the country's No. 4 lender by assets, aims to rein in loan growth and boost its capital after a lending spree that helped it notch a forecast-beating fourfold jump in fourth-quarter profit.
A record 9.6 trillion yuan (US$1.41 trillion) in new loans by Chinese banks last year has raised worries about growth in bad loans and set off a capital-raising spree among lenders to cushion them from potential future losses.
BOC has announced plans to issue up to 20 percent of its existing shares and as much as 40 billion yuan worth of convertible bonds in Shanghai.
That would help it raise its capital adequacy ratio (CAR) to above 11.5 percent in 2010-12, up from 11.14 percent in 2009, President Li Lihui told analysts on a conference call following the release of the company's full-year results in Hong Kong yesterday. That would still be below the 12 percent in the three previous years.
BOC said it aimed to increase new yuan lending by 17 percent this year, after they expanded at almost three times that rate last year under China's economic stimulus package that included numerous incentives for banks to boost lending.
"The bank's profit for this year should be quite sound again with a 17 percent increase in new loans, and net interest margins will see a mild expansion without interest rate increases," said Sheng Nan, an analyst at UOB Kay Hian in Shanghai.
BOC, in which Royal Bank of Scotland has a 2.69 percent stake, posted a jump in October-December profit to 18.9 billion yuan from 4.4 billion yuan a year before.
Analysts had on average forecast a profit of 17.2 billion yuan, according to Thomson Reuters.
The fourth quarter of 2008 had been impacted by impairment allowances the bank, which is China's top foreign exchange lender, booked against its exposure to United States mortgage-related securities.
In a new initiative, the bank is talking with Temasek Holdings, a Singapore government investment company, to set up an equally owned rural business bank in China, Li told a media briefing, adding the bank would have 40-60 branches at first.
A record 9.6 trillion yuan (US$1.41 trillion) in new loans by Chinese banks last year has raised worries about growth in bad loans and set off a capital-raising spree among lenders to cushion them from potential future losses.
BOC has announced plans to issue up to 20 percent of its existing shares and as much as 40 billion yuan worth of convertible bonds in Shanghai.
That would help it raise its capital adequacy ratio (CAR) to above 11.5 percent in 2010-12, up from 11.14 percent in 2009, President Li Lihui told analysts on a conference call following the release of the company's full-year results in Hong Kong yesterday. That would still be below the 12 percent in the three previous years.
BOC said it aimed to increase new yuan lending by 17 percent this year, after they expanded at almost three times that rate last year under China's economic stimulus package that included numerous incentives for banks to boost lending.
"The bank's profit for this year should be quite sound again with a 17 percent increase in new loans, and net interest margins will see a mild expansion without interest rate increases," said Sheng Nan, an analyst at UOB Kay Hian in Shanghai.
BOC, in which Royal Bank of Scotland has a 2.69 percent stake, posted a jump in October-December profit to 18.9 billion yuan from 4.4 billion yuan a year before.
Analysts had on average forecast a profit of 17.2 billion yuan, according to Thomson Reuters.
The fourth quarter of 2008 had been impacted by impairment allowances the bank, which is China's top foreign exchange lender, booked against its exposure to United States mortgage-related securities.
In a new initiative, the bank is talking with Temasek Holdings, a Singapore government investment company, to set up an equally owned rural business bank in China, Li told a media briefing, adding the bank would have 40-60 branches at first.
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