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BOC reports 43% profit growth in H1

By Mao Lijun (China Daily)
Updated: 2008-08-29 09:39

Bank of China, the country's third largest bank by assets, posted a 42.78 percent growth in first-half net profit, the only domestic listed bank reporting a profit growth below 50 percent.

The Beijing-based bank said yesterday that its net profit vaulted 42.78 percent to 42.18 billion yuan ($6.17 billion) in the six months to June 30 from a year earlier. However, it is the slowest profit growth among the country's 14 publicly traded banks.

According to data compiled by Bloomberg, the country's 13 other listed banks posted on average a 96 percent increase in first-half profits.

Analysts said the bank's huge US subprime-related asset has greatly eroded the lender's earnings.

The bank said its losses on securities tied to subprime mortgages total $1.9 billion, up from $1.5 billion on March 31.

The bank held $1.83 billion of securities tied to so-called Alt-A mortgages and $5.08 billion of other home loan investments.

"Bank of China is facing a serious challenge and pressure to its business," said Li Lihui, president of the bank.

The bank said it held bonds related to Fannie Mae and Freddie Mac, the troubled US mortgage agencies, totaling $7.5 billion, and $5.17 billion of mortgage-backed securities guaranteed by the two largest US home loan providers.

Analysts said the bank's earnings were also hurt as a stronger yuan against the greenback eroded the values of its overseas holdings.

The bank has the highest ratio of overseas investment among Chinese banks at 44 percent. It also has the highest ratio of foreign exchange assets at more than 30 percent, much higher than the average 8 percent of domestic banks.

"The bank's foreign exchange holdings have been and will continue to have a negative effect on its profit," said Yuan Lin, an analyst from Bank of China International Securities.

The bank has 689 outlets overseas, with the overseas business accounting for 43 percent of Bank of China's profit in 2007, compared with only 3 percent for Industrial and Commercial Bank of China, the country's largest bank by assets.