How Citic Bank traded rapid growth for bad loans
Reliance on corporate finance business in 2013 exposed mid-sized bank to China's high debt problem, hurting 2014 profits
At this time last year, China Citic Bank was preparing to announce a 26 per cent year-on-year leap in profit. This week, Citic will likely show that profits grew only 3.9 per cent last year, claiming the lead for the most precipitous drop in growth among any listed Chinese bank.
The results will not surprise.
The Beijing-based bank, an outgrowth from one of the mainland's earliest conglomerates in the reform era, already spelled out the bad news in a preliminary report last month.
It also reported a 2.1 per cent drop in profit growth in the third quarter of last year.What was Citic's advantage several years ago became a major hurdle last year. As part of Citic Group, the bank has strong ties to other large corporations and carved out its business in lending to state companies.
"In terms of corporate finance business, the bank is more or less an industry leader," it said in its full-year report last year.
Among its mid-tier peers, it was indeed the biggest lender to corporations for several years running. In 2013, Citic's corporate business accounted for about 70 per cent of all pre-tax profit.