China's biggest bank reports 20 percent jump in 2004 profits

The Industrial and Commercial Bank of China (ICBC), the country's largest lender, chalked up a roughly 20 percent year-on-year growth in operating profits in 2004, a bank spokesman said Thursday.

The bank raked in 74.7 billion yuan (9 billion US dollars) last year, but only 3.16 billion yuan (381.6 million dollars) stayed on its book, with the big remaining part used to cover loan losses.

As a result, the bank's outstanding non-performing assets plummeted by 40.5 billion yuan (4.9 billion dollars) in the 12 months. By the year end its non-performing loan (NPL) ratio stood at 19.1 percent by the international standard, the spokesman said.

The bad debt proportion is still alarmingly high, compared with 1-2 percent of world famous banking giants, sparking anticipation that the Chinese government would inject hefty funds into it to bolster its capital base, in another bailout package to reform the key banking system.

President Jiang Jianqing of the bank revealed earlier that more than 90 percent of the bank's existing bad loans, however, came still from lending extended before 1999, the year in which China set up four special asset management companies to handle a combined 1.4 trillion yuan (169.1 billion dollars) in NPLs transferred from state banks.

After then the bank's NPL ratio for newly-added loans was capped at just 1.6 percent, meaning the bank either recovered or wrote off nearly 5 billion yuan (603.9 million dollars) in NPLs on a monthly average since 2000, he added.

China is in the midst of overhauling its banks, largely including the Big Four -- the ICBC, the Bank of China (BOC), the China Construction Bank (CCB) and the Agricultural Bank of China (ABC) -- ahead of the World Trade Organization-mandated opening of the financial market to foreign rivals by the end of 2006.

At the end of 2003 China poured a combined 45 billion dollars in foreign exchange reserves into the BOC and CCB to help replenish its capital.

The two are scheduled to go public this year, whereby they hope to streamline operation and sharpen competitive edges. At present,the BOC and CCB have introduced joint-stock systems and corporate governance including the establishment of a shareholders' meeting,board of directors, board of supervisors and senior management.

The ICBC said it would seek public listing in 2006. Details of the plan are not available.

On Thursday, the bank said its combined assets increased by 430 billion yuan (51.9 billion dollars) in 2004.

The bank posted a 46 percent surge in income from intermediate business, such as bank card and bill business, to 11.5 billion yuan (1.4 billion dollars) in the year.

This is eye-catching because Chinese banks traditionally resort to differentials between loan and deposit rates to make earnings, but for the ICBC, its intermediate business income has climbed to 14 percent of that from rate gaps.

Source: Xinhua