Loans lift Pudong bank half-year earnings 31pc

PUBLISHED : Saturday, 12 August, 2006, 12:00am
UPDATED : Saturday, 12 August, 2006, 12:00am

Shanghai lender sees 1.59b yuan return from higher-yielding property financing

Shanghai Pudong Development Bank, partly owned by Citigroup, says half-year profit jumped 31 per cent as loan growth remained strong despite the government's measures to control credit expansion in the country.

Net profit rose to 1.59 billion yuan for the period, compared with 1.22 billion yuan a year earlier, while revenue surged 23 per cent to 12.7 billion yuan, the Shanghai-listed lender said yesterday.

'Pudong Development Bank's profits and loans increased at a rapid pace, spurred by the booming economy in Shanghai,' said Zhang Jing, a banking analyst at Shanghai Securities.

'Unlike its rivals, [the bank] lends most of its funding to property development projects in Shanghai and those loans yield higher interest rates, though the underlying risks are higher as well.'

Pudong Development Bank last year granted about 18 per cent of its loans to customers in Shanghai, where it derived 46 per cent of its interest income for the year. Property-related sectors made up 10 per cent of lending.

To curb runaway investment growth and an overheating economy, the central government implemented a series of tightening measures including a 0.27 percentage point rise in the domestic lending rate to 5.85 per cent in April.

It also lifted capital reserve requirements at banks by 0.5 percentage point to 8 per cent of their loans last month.

Still, P the bank's outstanding loans totalled 430.8 billion yuan at the end of June, up 14.2 per cent from 377.2 billion yuan a year earlier, with customer deposits up 10.6 per cent to 519.1 billion yuan.

Its non-performing loan ratio fell to 1.82 per cent of loans at the end of June from 1.97 per cent at the end of last year. It aims to keep this at less than 1.85 per cent this year.

Mr Zhang said the austerity measures would not have a significant impact on Pudong Bank as it would seek other channels to grow its loan book.

However, its ability to expand may be constrained by its low capital base, which is just above the 8 per cent required by the banking regulator.

To shore up its capital base, the bank raised 2.6 billion yuan through the sale of 10-year subordinated debt last month. Board secretary Shen Si said the bank planned to sell 700 million new shares by the end of the year.

Pudong Development Bank expected its profit would surge more than 30 per cent for the full year, Mr Shen added. The lender earlier projected a 25 per cent rise.

He said Citigroup, the world's largest financial group, remained interested in boosting its 4.6 per cent stake in the bank to the maximum 19.9 per cent permitted for a single foreign investor.

Meanwhile, the bank said it had appointed Fu Jianhua, former chairman at Bank of Shanghai, as its new president, succeeding Jin Yun, who remains the chairman.