China Construction Bank, the world's second-largest lender by market value, will suffer losses from the three billion yuan (HK$3.69 billion) owed to it by a private company in Zhejiang that has filed for bankruptcy, a top bank executive said.
Of the debts owed by conglomerate Zhejiang Zhongjiang Group, 98 per cent was guaranteed or backed by collateral, and 1.6 billion yuan was in loans, CCB vice-president Zhu Hongbo told the official Financial News on Tuesday.
Shares in CCB fell 7.18 per cent in Hong Kong last week and 3.12 per cent in Shanghai after the New Century reported on June 9 the bank was the biggest lender to Zhongjiang, which was hit hard by last year's government crackdown on property market speculation. CCB lost 0.25 per cent in Shanghai and 0.62 per cent in Hong Kong yesterday.
'The core companies of the Zhongjiang group are still under normal operation, and our interests are mainly in these companies,' Zhu said. 'Of course we will bear some losses. We booked some provisions last year.'
Xinhua reported last month that the Zhejiang police had arrested Yu Zhongjiang, the owner of the company, on suspicion that he had illegally collected public funds. The company has businesses in investment, property and chemicals.
The CCB executive said there were flaws in risk warning and control systems in some grass-roots branches. However, 'generally speaking, our internal risk control is effective', the executive said.