China's banks duck credit crisis, mostly
SHANGHAI, China—Major Chinese lenders Industrial & Commercial Bank of China and Bank of China posted record profits in 2007, as gains in interest income and fee-based businesses offset losses from the global mortgage-lending crisis.
Chinese financial institutions sectorwide are reporting strong profit growth in contrast to the malaise afflicting western lenders ensnared in credit woes tied to the U.S. housing market.
Bank of China, the country's most international bank, reported that its net profit rose 31 percent to 56.3 billion yuan ($8 billion) in 2007, despite its nearly $5 billion in investments in mortgage-backed securities.
That result, up from 43.8 billion yuan in 2006, beat analysts' forecasts.
Bank of China has reported the highest exposure among Asian banks to the U.S. mortgage crisis. It posted an impairment allowance of $1.3 billion for its $4.99 billion in investments in so-called subprime securities.
Fellow state-owned lender ICBC said its net profit rose 65 percent in 2007.
Net profit for 2007 was 81.5 billion yuan ($11.6 billion), up from 49.3 billion yuan in 2006, the Beijing-based bank said in a statement.
At $1.23 billion, ICBC reported a much lower exposure to current credit problems compared with many U.S. and European lenders. It said its business was "not significantly affected" by that fallout.
"The operational risk management of the bank continued to stand at a prudent level compared to domestic and overseas peers," the bank said.
Chinese banks have seen their profits soar in recent years, helped by rising interest rates and a diversification into wealth-management, consumer credit and other fee-based businesses.
Meanwhile, BOC Hong Kong (Holdings) Ltd., the Hong Kong arm of Bank of China, reported a 10 percent rise in net profit for 2007, as higher net interest income offset losses from its U.S. subprime mortgage-related exposure.
Net profit for the 12 months that ended Dec. 31, 2007 was Hong Kong $15.5 billion ($2 billion), up from HK$14 billion in 2006.
The lender, which is 66 percent-owned by Bank of China, said its full-year net interest income from core lending activities rose 22 percent to HK$19.40 billion ($2.5 billion) from HK$15.84 billion.
