Banking News
- Booming economy boosts BOC net
Date: 1-Nov-2007 Sources: (Shenzhen Daily)
BABK of China (BOC), the country's major foreign exchange lender, posted a 23 percent rise in third-quarter profit as the mainland economy boomed.
But the Hong Kong and Shanghai-listed bank booked US$643 million in provisions and reserves to account for its exposure to U.S. subprime mortgage-backed bonds.
The lender's share price has lagged that of its peers after it reported Aug. 23 that it held US$9.65 billion worth of U.S. subprime-related bonds and collateralized debt obligations, the largest exposure revealed by a Chinese bank.
'If you want to invest in Chinese banks to tap the booming economy, you have plenty of choices. I would not choose Bank of China due to the uncertainty of its subprime problem,'said Michael Chung, fund manager at Iventure Investment Management.
Loan growth is slowing at domestic banks as the government tries to manage economic expansion, which reached 11.5 percent in the third quarter, by raising interest rates and reserve requirements. Still, banks' profits are expected continued to grow thanks to widening interest margins.
Bank of China said it booked quarterly impairment allowances of US$135 million and US$187 million against the subprime asset-backed securities and subprime collateralised debt obligations, respectively.
To reflect the depreciation in fair value of the related subprime securities, the lender also set aside US$321 million of reserves against the balance sheet.
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