CCB to sell bad loans to asset firms

Updated: 2013-08-27 06:50

By Yang Ziman (China Daily)

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China Construction Bank Corp will face continuous pressure on asset quality in the second half of the year and may sell some bad assets, a senior executive said on Monday at a news conference.

China's second-largest commercial bank doesn't rule out the possibility of selling some of its soured loans to asset management companies as a potential option to cope with deteriorating asset quality, said Pang Xiusheng, CCB's vice-president.

The bank held 80.3 billion yuan ($13.02 billion) of non-performing loans by the end of June, an increase of 5.7 billion yuan from the end of last year, in contrast with the more than the 3.7 billion increase in bad loans throughout 2012, according to its interim results released on Sunday.

It achieved non-performing loan ratio lower than 1 percent in the first half by writing off bad loans worth 5.4 billion and collecting payments of 1.2 billion yuan on such loans.

However, given China's economic slowdown this year, the amount of NPLs that can be turned into normal loans could be worrisome, said Pang.

The CCB will write off much more bad loans compared with last year.

Wang Hongzhang, the bank's chairman, said that Bank of America Merrill Lynch's recent selling of CCB's shares was not prompted by a lack of confidence in the bank's performance.

Instead, the US company has been selling CCB's shares to cushion the impact of the subprime crisis. Pang expressed hope that the company will continue to hold CCB's shares since the US bank's business has picked up this year.

The total value of CCB's shares held by the US bank stood at 11.6 billion yuan based on a stock price of 5.79 yuan per share last Friday.

The shares' lock-up period will end soon, raising the possibility that Bank of America Merrill Lynch may clear the shares soon, the Hong Kong Economic Journal reported.

The US firm has been reducing its stake in CCB since the beginning of 2009, reaping profits of nearly 200 billion yuan.

CCB registered 119.7 billion yuan in net profit from January to June, up 12.65 percent year-on-year. The bank posted 251.4 billion yuan in operational income, an increase of 10.75 percent year-on-year, with 0.48 yuan earnings per share.

CCB said that the increase in profitability was attributable to the increase in interest-bearing assets. Its net interest income grew 10.59 percent year-on-year. Also, it saw a stable increase in fees and commissions.

Its capital adequacy ratio, which reflects a bank's capacity to cushion potential losses with capital, stood at 13.34 percent, down 0.29 percentage points from that at the end of March.

The bank plans to raise nearly 60 billion yuan by issuing new financial instruments before the end of 2015, it added.

(China Daily USA 08/27/2013 page16)