China Development Bank income increases to 29.6b yuan
China Development Bank, the biggest of the nation's three policy lenders, yesterday reported a slower 6.9 per cent rise in profit last year amid Beijing's measures to curb loan growth.
The bank, a government lender that funds infrastructure projects, said net income rose to 29.6 billion yuan (HK$33.87 billion) from 28 billion yuan a year earlier. The bank's outstanding loans stood at 2.25 trillion yuan by the end of last year, up 12.4 per cent but far from the industry growth of about 16 per cent.
'The bank has earnestly followed China's macro control policy with [loan] growth lower than the average of all financial institutions in China,' the Beijing-based lender said.
The bank said it had spread lendings evenly throughout the year, with 25 per cent of the quota allocated in the first quarter, 60 per cent by the end of the first half and 76 per cent by the end of the third quarter.
This was 'in stark contrast to the aggressive lending strategies of other financial institutions during the period', it said.
Beijing has cut lending quotas for banks to tighten credit growth and control overheating and inflation. Policy lenders, which are directly supervised by the State Council, tend to adhere more closely to the government's directives.
'Since they place government policy as top priority, we should not expect their earnings growth to perform any better than other commercial lenders,' said Liao Qiang, an analyst at Standard & Poor's.
'Moreover, they generate most of the profits from loan interest and very little from fee and commission income, which was a powerful growth driver for mainland lenders last year.'
Last year, the bank made 24 per cent of new loans in rural areas in support of the government's policy. About 55 per cent went to the western regions and the old industrial bases in the northeast.
It said 73 per cent of the loans were used to boost the country's infrastructure development and help finance basic industries, energy, communications, transport and raw materials.
In December, the policy bank received a US$20 million capital injection from the government, propping up its capital adequacy ratio from 8.05 per cent in 2006 to 12.77 per cent. Its non-performing loan ratio fell to 0.59 per cent from 0.72 per cent in 2006 and 0.96 per cent in 2005.
The bank has received government approval to set up a stockholding company to pave the way for an eventual listing of its shares.