Business

Friday September 11, 2009

Bank of China says it needs more capital


No specific plans or timeframe set for the fund raising

DALIAN: Bank of China, the country’s biggest foreign exchange lender, said it will need more capital to meet its adequacy ratios, following a first-half lending binge under Beijing’s loose money policies.

Executive vice-president Zhu Min said the Beijing-based lender, in which Royal Bank of Scotland has a 2.69% stake, had no specific fund-raising plans.

“It will be a commercial decision. There’s no timetable,” he told Reuters in an interview on the sidelines of the World Economic Forum in the northeastern port city of Dalian.

Shares in the bank jumped nearly 4% yesterday to a 26-month high, with stock worth HK$1.3bil changing hands.

Bank of China last month posted a 10% increase in second-quarter profit as its lending soared after China launched a four trillion yuan (US$586bil) economic stimulus plan.

Despite that boom and the ensuing need for more capital as Beijing now reins in its monetary policy, Bank of China does not expect to see any major rise in its non-performing loan ratio in the near future, according to Zhu.

He said the bank believed that the overall lending patterns for China’s banking industry should grow in a stable pattern over the next six to 12 months.

“It (lending) will not undergo a very dramatic drop, because still these projects are ongoing ones that need financing – and the crisis is not over yet,” he said.

Bank of China is expected to scale back lending in the coming months as Beijing moves to stem a break-neck increase in liquidity fuelled by its massive stimulus programme.

Heeding Beijing’s call to step up lending in support of the economy, Chinese banks granted a record 7.4 trillion yuan in new loans in January–June, or about a quarter of the country’s annual gross domestic product.

Lending slowed in July–August after regulators, worried about a potential rise in bad loans and asset bubbles, leaned on banks to rein in credit growth and drafted rules to tighten their capital requirements. — Reuters

Major Chinese banks reported broadly flat first-half earnings, but their second-quarter profits jumped from a year earlier as the lending spree outweighed compression of their net interest margins.

As China shifts to tighter monetary policy with the economy on the road to recovery, banks’ interest margins are widely expected to rebound, giving them a more solid profit source.

Bank of China saw its net interest margins bottom out in July, Zhu said, echoing recent comments by rivals including Industrial and Commercial Bank of China and China Construction Bank. — Reuters


For Another perspective from the China Daily, a partner of Asia News Network, click here


Latest business news from AP-Wire

  • E-mail this story
  • Print this story