Loan demand drives up Huaxia profit 13pc
Shares fall 2.73pc as bank boosts capital for more lending
Huaxia Bank, a Beijing-based lender partly owned by Deutsche Bank, says profit rose 13 per cent last year as China's strong economic growth prompted demand for loans.
Net profit climbed to 1.46 billion yuan or 35 fen per share last year, from 1.29 billion yuan or 31 fen per share in 2005, the bank said in a preliminary earnings statement to the Shanghai Stock Exchange yesterday.
Revenue jumped 30 per cent to 18 billion yuan.
Return on net assets rose to 12.51 per cent, 1.46 per cent higher than a year earlier, Huaxia Bank said. All the figures on the statement were unaudited, the bank said. It did not provide other figures such as deposits, loans and bad debt level.
'The bank's growth is in line with our expectation,' said Gu Junlei, an analyst at China Orient Securities. 'These are the very results the bank should have had in 2006, given the better macroeconomic environment in the country.'
China's economy rose 10.5 per cent last year, the highest in 11 years. Mainland enterprises are borrowing more to expand, hoping to tap the continued fast growth.
To strengthen its capital for more lendings, Huaxia Bank raised two billion yuan by selling subordinated bonds in November last year. It also plans to sell 4.5 billion yuan worth of hybrid bonds.
At the end of June last year, the bank had a capital adequacy ratio of 7.46 per cent, lower than the 8 per cent required by the banking regulator.
'The uncertainty is that the bank may announce a plan to boost its capital base later this year,' Ms Gu said.
Shares of Huaxia Bank fell 2.73 per cent yesterday after the release of the statement. The stock has gained 73 per cent over the past 12 months, trailing the 112 per cent rise in the Shanghai Composite Index.
'Investors are gradually becoming more rational and focusing more on the fundamentals of the banks,' said Ken Su, a China banking analyst at KGI Securities.
'Second-tier banks such as Huaxia Bank and Shenzhen Development Bank will see their shares in a less advantageous position in the long term, given the gains they already had in the past.'