Bank of China Posts Slowest Profit Growth in 2 Years (Update1) By Luo Jun and Chia-Peck Wong
Oct. 29 (Bloomberg) -- Bank of China Ltd., the nation's largest foreign-exchange lender, said profit rose at the slowest pace in two years as credit-market losses increased and loan demand declined in China. Net income climbed 11.5 percent to 17.8 billion yuan ($2.6 billion), or 0.07 yuan a share, in the three months ended Sept. 30 from 15.9 billion yuan, or 0.06 yuan a year earlier, the Beijing-based company said in a statement today. Writedowns on securities tied to subprime mortgages and other U.S. credit investments widened to $3.57 billion. Bank of China has written off more than all Chinese banks combined because of a global credit crisis that has led to more than $660 billion in losses and almost 150,000 job cuts at financial institutions worldwide. Slowing economic growth will hamper earnings at all lenders and the mortgage losses have stymied Chairman Xiao Gang's attempts to catch up with rivals that avoided the contagion because of a domestic focus. ``We're staying away from Bank of China, no matter how cheap the valuation may look,'' Wang Yihuan, a Beijing-based analyst at China Asset Management Co., which manages the equivalent of $36 billion, said before the results were released. ``Its potential loss on overseas investments will keep dragging down profit.'' The nation's third-largest bank by value was also hurt as China's economy expanded at the slowest pace in five years in the third quarter. ICBC boosted net income by 26 percent in the quarter, the smallest since going public two years ago, and profit growth at China Construction Bank Corp. decelerated for two straight quarters to 12 percent. The two largest Chinese banks posted a combined $2.7 billion in write- offs on their overseas investments as of Sept. 30. Slowing Economy Shares in Bank of China have dropped 55 percent in Shanghai and 47 percent in Hong Kong over the past year. Bank of China trades at 0.9 times forecast end-2008 book value, below the average 1.2 times among the nation's six-largest, publicly-traded banks in Hong Kong, according to Bloomberg data. Citigroup Inc., the biggest U.S. bank, has a price-to-book multiple of 0.6. China's cabinet has increased infrastructure spending and cut taxes for exporters and home purchasers, and the central bank has reduced interest rates twice since September to stimulate the economy. The central bank has also attempted to slow yuan appreciation against the dollar since mid-July to protect export jobs. The yuan has climbed 6.7 percent against the dollar this year, making it the best- performing Asian currency. ``The economic outlook is pretty gloomy and that's a barometer for banks,'' said Wang Xu, a Shanghai-based analyst at China Universal Fund Management Co. ``Corporate defaults have spread to bigger publicly-traded companies from small, private firms.'' About half of China's toymakers have shut down this year, with 7,000 workers losing their jobs when Smart Union Group Holdings Ltd. closed factories in Guangdong province this month, state media say. A quarter of the 70,000 Hong Kong-owned businesses in the Pearl River Delta region may go bust, the Federation of Hong Kong Industries estimated this month. To contact the reporters on this story: Luo Jun in Shanghai at at [EMAIL PROTECTED]; Chia-Peck Wong in Hong Kong at [EMAIL PROTECTED] Last Updated: October 29, 2008 05:56 EDT --~--~---------~--~----~------------~-------~--~----~ Thanks for being part of "PoliticalForum" at Google Groups. For options & help see http://groups.google.com/group/PoliticalForum * Visit our other community at http://www.PoliticalForum.com/ * It's active and moderated. Register and vote in our polls. * Read the latest breaking news, and more. -~----------~----~----~----~------~----~------~--~---
