Shanghai Pudong misses loan target

PUBLISHED : Monday, 28 February, 2005, 12:00am
UPDATED : Monday, 28 February, 2005, 12:00am

Despite rising defaults, the lender lifts its net income 23pc for the full year

Shanghai Pudong Development Bank missed its target for reducing non-performing loans on its books last year, as China's macroeconomic tightening measure boosted default rates.

The bank nonetheless posted strong profitability for the period, the first full year with Citigroup of the United States as a minority shareholder. Citigroup stands to pocket 21.7 million yuan in dividends from the 4.62 per cent stake it took in the bank in September 2003.

Net profit at Shanghai Pudong rose 23 per cent to 1.93 billion yuan last year, and the bank declared a cash dividend of 12 fen per share.

The Shanghai-listed bank's non-performing loans stood at 2.45 per cent of its loan book of 310.9 billion yuan at the end of last year, according to the five-category loan classification system modelled on international best practice, the bank said in its annual report released at the weekend.

Although this represented a 0.08-percentage-point drop in non-performing loans from the previous year, the ratio exceeded the 2 per cent target the bank had set.

It did not offer any explanations, but analysts widely expected that asset quality at mainland banks had been affected by macroeconomic austerity measures, including tighter credit, instituted by Beijing last year to cool overheating sectors.

The absolute value of China's non-performing loans would have risen last year after two years of decline, had it not been for large government-orchestrated sales of problem loans at the two biggest state banks.

International rating agency Fitch last week said it expected the trend to continue this year 'as the more marginal corporate borrowers face funding difficulties as banks adopt a more cautious stance towards loan growth amid a slower economy'.

Shanghai Pudong expanded its loan-loss provision to 8.9 billion yuan by December last year. Combined with collateral held against the loans, the provision covered 117.1 per cent of its non-performing loan portfolio - among the highest in an industry dogged by insufficient provisions.

The bank's core operating revenue surged 39 per cent to 16.76 billion yuan from 2003. Its capital-adequacy ratio declined 0.61 percentage point to 8.03 per cent by December 31, barely above the regulatory minimum of 8 per cent.


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