Citic Bank warns rate rise to slow loan growth

PUBLISHED : Friday, 24 August, 2007, 12:00am
UPDATED : Friday, 24 August, 2007, 12:00am

China Citic Bank Corp, the mainland's eighth-largest lender, warned of slower loan growth after the central bank raised interest rates for the fourth time this year on Tuesday.

Citic Bank was adjusting its assets to ease the impact of the rate rise on profitability, chairman Chen Xiaoxian said yesterday in a post-results briefing.

'The interest rate increase will more or less affect our loan growth, but it should have little impact on our profitability and loan book,' he said.

The bank on Wednesday said first-half net profit rose 82.4 per cent to 3.22 billion yuan on an increase in intermediary income, faster loan growth and a wider interest margin. Net interest income rose 53.26 per cent to 11.25 billion yuan as loans leapt 21 per cent to 535.51 billion yuan.

Mr Chen said the growth drivers in the second half would be wealth management, corporate banking and credit cards.

'Our credit-card business had become profitable since the end of last year,' he said.

The bank issued 77,200 cards in the first half, a 108.5 per cent increase from a year earlier, rasing the total to more than three million.

Citic Bank said it was negotiating with its shareholder, Banco Bilbao Vizcaya Argentaria (BBVA), Spain's second-biggest bank, on increasing the shareholding.

BBVA chairman Francisco Gonzalez in March said his bank planned to double its stake in Citic Bank to 10 per cent.

The mainland bank, which has not opened new branches in five years, would open four this year after meeting requirements on capital adequacy and loan impairment ratios, Mr Chen said.

Separately, Citic Bank sister company Citic International Financial Holdings posted a 207 per cent jump in net profit to HK$1.51 billion on higher contribution from Citic Bank, in which it owns 15 per cent.

Operating profit before impairment charges rose 45 per cent to HK$696 million.

Citic International said yesterday it expected BBVA to also increase its stake in the firm before the end of the year.

In March, Mr Gonzalez said BBVA planned to spend Euro1 billion (HK$10.6 billion) to raise its stake from 15 per cent to 35 per cent in Citic International and to double its holdings in Citic Bank.

Citic International chief executive David Dou said yesterday his firm would not pay an interim dividend to shareholders, as it would need the money to buy BBVA's Asian assets later.