BOC boosts net profit 12.3pc

Mainland bank braces for challenge from a slowing economy after increased loans, cost cuts and expansion help boost profit 12.3pc

PUBLISHED : Thursday, 27 March, 2014, 12:58am
UPDATED : Thursday, 27 March, 2014, 12:58am

Bank of China, the fourth-largest bank on the mainland by market value, said net profit grew 12.3 per cent last year to 156.9 billion yuan (HK$197.9 billion) as a rise in net interest margins helped lift profits.

Net interest margin increased 9 basis points to 2.24 per cent, realising a net interest income of 284 billion yuan, up 10.36 per cent on the year.

The bank's profitability was also boosted by increased loans, cost savings and overseas expansion.

The mainland's slowing economy would pose a challenge for the bank.

"China's economic situation will shift this year from fast growth to a medium to fast growth [scenario], while economic restructuring and a reduction in overcapacity continue. This poses a bigger risk to banks," BOC president Chen Siqing said at a press conference yesterday. "We need to increase investment and speed up overseas expansion while improving the asset quality of domestic businesses and enhanced risk management."

The bank boosted its non-interest income by expanding its consultancy and advisory, asset management and enterprise services.

Non-interest income grew 13.47 per cent to 124 billion yuan. Non-interest income represented 30.41 per cent of the company's operating income, an increase of 0.58 percentage point compared with 2012.

In cost control, cost-income ratio improved to 30.61 per cent, a fall of 1.12 percentage points from a year earlier. BOC's overseas assets reached US$630.8 billion by the end of last year, an increase of 26.46 per cent from 2012.

Non-performing loans rose to 7.8 billion yuan, with the NPL ratio rising 0.01 percentage point.

"Our overall asset quality is good and non-performing loans are almost negligible compared with our total assets, but we still need to pay much attention to it," Chen said.

He said the bank's outstanding loans to the real estate sector was 311.5 billion yuan, while those to local government financing vehicles amounted to 353.5 billion yuan and industries plagued by overcapacity totalled 188.5 billion yuan.

The tight liquidity situation last year forced the bank to carefully negotiate loan interest rates with customers. A credit squeeze pushed interbank borrowing costs to a six-month high in December.

BOC's net profit in the fourth quarter reached 36.7 billion yuan, a rise of 11 per cent from the 33.1 billion yuan recorded in the year-ago period.

The fourth-quarter result beat the 34.2 billion yuan estimate of six analysts by Thomson Reuters and the 32.8 billion yuan median of 24 estimates compiled by Bloomberg.

BOC is the second of the mainland's Big Four banks to report its earnings. On Tuesday, Agricultural Bank of China reported 14.5 per cent higher net profit of 166.2 billion yuan. Industrial and Commercial Bank of China will report today and China Construction Bank will release its results tomorrow.

BOC shares yesterday rose 2.48 per cent to close at HK$3.30 before the earnings results were released.