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Christine Chan

China Everbright Bank, which last year admitted tax evasion and accounting irregularities, said its pre-tax profit for the year rose 53 per cent to 636 million yuan (about HK$602.34 million).

Analysts attributed the surge to a low comparison base, instead of an improvement in the performance of the bank's underlying assets.

The bank is 21.4 per cent held by red chip China Everbright, the SAR-listed flagship of State Council-controlled China Everbright Group.

The bank said its profit before provisions rose 34.1 per cent last year to 2.1 billion yuan, while its non-performing loan ratio was cut by 6.1 per centage points.

However it did not give the ratio.

China Everbright Bank, the country's sixth-largest commercial lender, last year admitted - after a government investigation - that it had evaded 480 million yuan in tax in the 1999 takeover of the retail banking operations of China Investment Bank (CIB), a policy bank laden with bad debts.

The takeover of CIB was made at the behest of Beijing.

Arthur Lau, China banking analyst of ratings agency Fitch, said: 'China Everbright paid dearly for CIB because it was a policy decision, not a commercial one.

'CIB was a failure from the outset. It wanted to become an investment bank and then after failing to find success switched to become a commercial bank. Finally it ended up being folded.'

China Everbright has had to make huge provisions for CIB's distressed assets. Mr Lau said that beginning in 2001, it had also had to make provisions for the amortisation of goodwill worth 320 million yuan over 20 years.

This was in addition to surging operating costs from the takeover and severance payments to redundant staff.

'That weighed heavily on the bank,' Mr Lau said.

Despite being the sixth-largest lender, China Everbright had the poorest credit profile of the country's 10 shareholding commercial banks based on 2001 data.

The big four state banks were excluded from the comparison.

The data, complied by Fitch, showed that in 2001 the bank's return on equity was just 1.61 per cent, the lowest among all shareholding commercial banks.

China Everbright's return on assets (ROA) was just 0.07 per cent, also the worst among the shareholding commercial banks. The average ROA of Hong Kong banks is 1 per cent.

Its provisions as a percentage of its operating profit were 35.1 per cent, underlining its weak risk management.

Mr Lau said he expected it would be almost impossible for the bank to rethink its listing plans - at least within five years.

The bank had total assets of 329.4 billion yuan at the end of last year, up 24.1 per cent from 2001.



Bank reports 53pc profit lift after admitting tax evasion