Industrial and Commercial Bank of China, the country's biggest lender, and the Hong Kong unit of its smaller rival Bank of China said their fourth-quarter provisions were larger than the third quarter amid increasing risk in investments linked to subprime mortgages in the United States.
ICBC chairman Jiang Jianqing yesterday said his bank had taken a more prudent approach in view of the worsening subprime problems in the final quarter of last year.
'The provisions in the fourth quarter will be higher than that in the third quarter as the subprime problem worsened,' Mr Jiang said. 'We have made sufficient provisions according to the accounting standards.'
BOC Hong Kong (Holdings) also expected to make further provisions for the fourth quarter on its subprime-related securities as their market prices had fallen, said Raymond Lee Wing-hung, the bank's chief financial officer.
BOCHK's third-quarter provision was HK$51 million to cover potential losses on subprime-related investments.
Investors dumped shares in state-owned mainland lenders last week on speculation their earnings would be substantially eroded by more provisions for subprime exposure.
Shares in ICBC tumbled 5.38 per cent to close at HK$4.92 in Hong Kong yesterday and lost 6.23 per cent to 6.62 yuan in Shanghai. BOCHK fell 4.76 per cent to HK$19.62.