Banking News
- Finance Ministry to take stake in Agriculture Bank
Date: 12-Mar-2007 Sources: (Xinhua Online)
China's finance ministry will fund a cleanup of the Agricultural Bank of China's bad loans and become a shareholder of the country's biggest deposit-taking institution, bank President Yang Mingsheng said.
'The financial audit will be completed this year,' Yang said yesterday at the annual session of the National People's Congress in Beijing. 'The government will determine the extent of the bailout needed after the audit is completed. The finance ministry will inject funds and become a shareholder.'
A bailout of Agricultural Bank, which is burdened with 95 billion U.S. dollars worth of bad loans, may cost the government up to 140 billion dollars to help meet the Chinese central bank's eight percent minimum capital adequacy requirement. China's government wants to keep Agricultural Bank running to maintain its services to China's 800 million farmers this year, after closing 24,000 outlets since 2000 and paring its work force by 170,000 jobs, the bank Vice President Han Zhongqi said on Feb. 1.
The bank was founded in 1979 to lend to farmers. It comprised 18 percent of the country's bank branches as of January, mostly in villages in China's interior and its west.
The bank's network of 24,900 outlets is 2.7 times larger than the Bank of China's, and its 452,000 workers are 100,000 more than the staff size at the Industrial & Commercial Bank of China, according to Bloomberg News.
More than 60 percent of Agricultural Bank's outlets are in rural areas, which contributed little to its bottom line. The Beijing-based bank was China's biggest deposit-taking financial institution last year, with savings rising 17.3 percent, or by 700 billion yuan, according to the bank's statement.
Operating profit jumped 37 percent last year to a record 58.1 billion yuan, after wiping 4.2 billion yuan worth of bad loans off its accounts, according to the bank.
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