China Citic Bank said loans to local government financing vehicles (LGFV) rose about 50 billion yuan (HK$61 billion) to around 170 billion yuan in the first half, largely due to a redefinition of existing loans rather than new debts.
The increase in the bank's loans to LGFVs - companies that were established to borrow on behalf of local governments, which cannot borrow on their own - follows the industry trend. China's five largest banks by market capitalisation have reported a total increase of about 750 billion yuan in LGFV loans in the first half after regulators imposed stricter definitions.
While the first-half profit at China Citic Bank and its subsidiaries rose 40.61 per cent to 15 billion yuan from a year earlier, the group acknowledged that share prices have been under pressure because of investor concern about the sector as a whole and the future macro-economic environment.
'The gap between our performance and our share prices reflects investors' worries about the banking sectors' asset qualities and the property market,' said Luo Yan, secretary of the board at China Citic Bank. 'When there is future uncertainty on these elements, share prices will fluctuate.'
But Luo added that the bank had delivered good returns for investors.
China Citic Bank's LGFV loan increase is relatively small compared with its industry peers.
Industrial and Commercial Bank of China's LGFV loans rose about 282 billion yuan compared with the end of last year, while those at China Construction Bank rose about 49 billion yuan.