Bocom reins in lending amid tighter money supply
Toh Han Shih
Loan growth at Bank of Communications (Bocom) this year will be slightly lower than last year, said the Hong Kong-listed bank's executive vice-president Qian Wenhui.
Last year, the bank's loans grew 21.6 per cent to 21.9 billion yuan (HK$25.97 billion), while deposits jumped 20.9 per cent to 28.68 billion yuan and net profit rose 29.6 per cent to 39.04 billion yuan. Last year's net profit beat a Bloomberg consensus estimate of 17 analysts of 38.05 billion yuan.
'We have studied the business environment for this year. Money supply will be tighter. We must slow down our loan growth to a reasonable level,' said Qian.
The bank's revenue and profit will not suffer this year despite slower loan growth if it conducts operations efficiently, he said.
A Core Pacific-Yamaichi report forecasts that net profit at Bocom, one of the mainland's Big Four state banks, will grow at a slower rate of 24 per cent this year.
Bocom chairman Hu Huaibang said: 'Commercial banks face numerous pressures and challenges in 2011. The stabilisation of the nation's monetary policy and the increasing number of regulatory requirements from the central government are expected to result in strong constraints on the development of the loans business for commercial banks.'
On March 18 the government raised the reserve requirement ratio to 20 per cent. 'This will put a lot of pressure on banks' liquidity and balance sheets,' Hu said.
This year, Bocom will reduce its property loans but increase loans to individuals and small and medium-sized enterprises, said Qian. 'We will strictly restrict loans to government infrastructure projects, except economic housing.'
Bocom's loans to economic housing more than doubled from a small base last year, Qian said, adding: 'Economic housing is a major policy of the Chinese government.'
Manufacturing accounts for the biggest share of Bocom's loans at 19.59 per cent, followed by transport and postal services at 13.74 per cent, retail and wholesale at 9.59 per cent, water infrastructure at 7.33 per cent and property at 6.39 per cent, Qian said. Economic housing accounts for a minor portion of its property loans, he said.
Bocom's market share of yuan loans grew from 6.55 per cent in 2009 to 6.62 per cent last year, while its share of yuan deposits rose from 5.75 per cent to 5.93 per cent.
For now, Bocom has no new financing plans and will rely on internal funds, said chief financial officer Yu Yali.