Bank of China to rein in loan growth, boost capital (Business Times (Malaysia))
BEIJING/HONG KONG: Bank of China, the country’s No. 4 lender by assets, said it is aiming to rein in new loan growth and boost its capital, following a 2009 lending spree that helped it notch a forecast-beating fourfold jump in fourth-quarter profit.
A record 9.6 trillion yuan (100 yuan = RM48.63) in new loans by Chinese banks last year has raised worries about growth in bad loans at the banks and set off a capital-raising spree among lenders to cushion any potential future losses.
Bank of China has announced plans to issue up to 20 per cent 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 to above 11.5 per cent in 2010-2012, up from 11.14 per cent in 2009, president Li Lihui told analysts on a conference call yesterday following the release of the company’s full-year results. that would still be below the 12 per cent in the three previous years.
Bank of China also said it aimed to increase new yuan loans by 17 per cent this year, after they grew at almost three times that rate last year under Beijing’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-per cent increase in new loans, and net interest margins will see a mild expansion without interest rate increases,” said Sheng Nan, an analyst with UOB Kay Hian in Shanghai.
Bank of China, in which Royal Bank of Scotland has a 2.69 per cent stake, posted a jump in October-December profit to 18.9 billion yuan from 4.42 billion yuan a year earlier.
Analysts had forecast on average a profit of 17.2 billion yuan, according to Thomson Reuters I/B/E/S.
the fourth quarter of 2008 was impacted by impairment allowances the bank, China’s top foreign exchange lender, booked against its exposure to US mortgage-related securities.
the lending surge of last year also means Bank of China’s bigger rivals Industrial and Commercial Bank of China and China Construction Bank are set to cement their positions as the most profitable banks in the world.
“The global economic depression has for the most part come to an end, while the domestic economy continues to recover,” Bank of China’s Li said in a statement.
“It is expected that 2010 will see the continuation of an important period of strategic opportunity for the banking sector.”
Bank of China, which served as China’s central bank during the early part of the 20th century and run by chairman Xiao Gang and Li Lihui, operated 10,789 outlets at home and abroad.
while last year’s growth was driven by volumes, Beijing’s moves to rein in lending growth could boost bank net interest margins – the difference between deposit and lending rates and a key source of profit for Chinese banks – and sustain growth this year, analysts said.
Bank of China’s net interest margin clocked in at 2.04 per cent for 2009, up slightly from 2.03 per cent in the first three quarters of the year, but down from 2.63 per cent in 2008. – Reuters
Bank of China to rein in loan growth, boost capital (Business Times (Malaysia))
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Tags: assets, convertible bonds, previous years, spree
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