China Everbright issues warning on key assets
Red chip China Everbright warned yesterday its two main assets would report substantially worse results for last year, hitting the group's bottom line.
This comes two months after analysts said the company appeared determined to clean up balance-sheet problems.
In a late-night announcement, the red chip said China Everbright Bank and China Everbright Securities would be affected by increased provisions and changes in market conditions.
China Everbright holds a 21.39 per cent stake in the mainland's No 6 commercial bank and 49 per cent of the nationwide brokerage.
In its announcement, it said the two contributed a combined 1.3 per cent of its profit in 2001.
In a February report, HSBC Securities said the two businesses accounted for more than 68 per cent of China Everbright's net asset value.
China Everbright management had signalled that it might have to make provisions for the bank, HSBC said. The management had indicated it would take a prudent and responsible approach to clean up historic problem assets.
HSBC estimated a provision of up to five billion yuan (about HK$4.68 billion) could be charged against China Everbright Bank for bad loans.
Last year, the bank made a 1.8 billion yuan interim provision under international accounting standards, after making a 1.9 billion yuan provision in 2001.
In addition, China Everbright Securities could make a full-year loss of about 169 million yuan last year, after losing 89 million yuan in the first half, HSBC said.
'Although China Everbright could report big losses this year, we believe the market will reward them with higher valuations if its balance sheet is cleaned up, putting it back on track for profitability,' HSBC said.
China Everbright is due to announce its full-year results on April 23. It fell 1.17 per cent yesterday to close at HK$2.10.