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ICBC (Asia) bounced back into the black last year with net profit of HK$150.06 million, continuing its long haul out of a morass of bad debt run up in China.

The bank, formerly Union Bank, celebrated its return to profitability by rewarding its revamped list of shareholders with a dividend cheque of HK$58.6 million, or 13 HK cents a share.

In 1999, it reported a loss of HK$547.48 million.

The lion's share of the cheque will go to ICBC (Asia)'s parent - Industrial and Commercial Bank of China (ICBC).

ICBC last year first acquired a 53.23 per cent stake in Union Bank from China Merchants Holdings. It raised that stake to 70.9 per cent through a general offer.

This led to a name change last year to reflect Union Bank's new pedigree. ICBC is the largest of the Big Four state-owned banks in the mainland with assets of HK$3.3 trillion. Last year, its net profit rose 27.78 per cent from a year earlier to a record 5.06 billion yuan (about HK$4.74 billion).

The 21-branch ICBC (Asia) and the Hong Kong branch of ICBC have provided ICBC with an expanded foothold in the Hong Kong market.

ICBC chairman Jiang Jianqing said: 'It is the expressed intention of Industrial & Commercial Bank of China to foster ICBC (Asia) into becoming its key flagship in the Asia-Pacific region.'

With assets of just HK$20.66 billion (up 8 per cent from HK$19.16 billion), and advances of just HK$12.23 billion (up 11 per cent), ICBC (Asia) was committed to expanding its profile in the Hong Kong market, said Chris Chan Chi-keung, managing director and chief executive.

ICBC needed ICBC (Asia)'s retail and commercial network to complement its growth strategy in Hong Kong, Mr Chan said.

ICBC (Asia)'s profit growth was mainly due to a 74 per cent decline in charges for bad and doubtful debts, down from HK$738.2 million to HK$192.59 million.

The consolidated non-performing loan (NPL) portfolio was down from HK$3.77 billion to HK$3.18 billion, partly driven by write-offs leading to cash recoveries of HK$236 million, and partly by restructuring of previous NPLs (HK$463 million).

A little more than half the gross NPL portfolio (HK$1.8 billion) has been injected into wholly owned asset management subsidiary UB China Business Management (UBCBM).

UBCBM was established in April last year to take over the bank's China NPLs.

However, despite the progress in tidying up its bad loans, the bank continues to run the poorest quality loan book of all listed banks in Hong Kong, with a ratio of NPLs to total advances at 23 per cent last year - down from 32 per cent in 1999.

Mr Chan dismissed suggestions that hiving off bad loans into a wholly owned asset management vehicle was simply delaying the inevitable - the need to write off the bad-loan portfolio and take a charge against profits.

'Of course, I would have liked to have started off with a clean slate,' Mr Chan said.

'But the bank and its shareholders did not have the resources to absorb those losses - and remember these are not yet losses.

'I would say in the remaining cases at least 40 to 50 per cent can be recovered, but it will be a long and drawn-out affair,' he said.



Strong recovery ahead of plans to expand regional profile