Bank of Communications

Bocom says no new capital needed as profit jumps

Bank of Communications has no fundraising plans, executive says as profit rises by 15pc

PUBLISHED : Thursday, 28 March, 2013, 12:00am
UPDATED : Thursday, 28 March, 2013, 6:31am

Bank of Communications (Bocom) said its existing capital could sustain the growth of the bank and it had no plan to raise funds in the equity market.

The bank's net profit jumped 15 per cent to 58.3 billion yuan (HK$72.8 billion) last year, in line with market expectations. It declared a final dividend of 24 fen.

Profits were helped by 16 per cent growth in net interest income.

The capital adequacy ratio rose 1.63 percentage points to 14.07 per cent, helped by a placement of shares that raised 56.6 billion yuan last year.

Executive vice-president and chief financial officer Yu Yali said the bank maintains a level of capital exceeding the regulatory requirement of 11.5 per cent. She said the bank will not raise funds on the equity market for at least three years but may consider other ways to boost its secondary capital, such as debt.

"We can have a reasonable growth rate and we hope to increase fee incomes and focus on our retail business, which requires less capital." Yu said.

President Niu Ximing expects the non-performing ratio, which rose by 0.06 percentage point to 0.92 per cent last year, to remain under 1 per cent.

Chairman Hu Huaibang said the non-performing loans were mainly in the wholesale and retail industries. He said since there is no systemic risk, the risk from those loans is manageable.

Net interest margin, the difference between loan income and funding cost relative to interest-bearing assets, fell by 2 basis points to 2.59 per cent at the end of last year.

Mainland regulators have allowed banks more flexibility to determine interest rates for loans and deposits. This has resulted in a squeeze on net interest margin as banks lower loan rates and increase deposit rates to attract customers.

Yu said Bocom's net interest margin had declined over 2012, but said: "We hope to maintain the level this year."

Bocom has a branch in Hong Kong, which Hu said the group will turn into a subsidiary by the end of 2015. All other state-owned mainland banks operate in Hong Kong through a subsidiary, an independent entity from the group that is required to fulfil the local regulatory requirements.