BANK of China Ltd said late yesterday it expects after-tax profit for 2007 to rise from the previous year, after considering a provision for its United States subprime-mortgage investments, denying an earlier report that it may report a profit drop or even a loss.
The bank's comments came after the South China Morning Post reported on Monday, citing unnamed sources, that the bank may report a lower net profit or a loss when it discloses its 2007 results due to substantial writedowns of its US subprime mortgage-backed securities investments.
Shares of Bank of China tumbled 4.14 percent on Monday to 6.53 yuan (90 US cents) on the report. Its shares were suspended from the trading yesterday.
"The report is totally ungrounded," the bank said in a statement to the Shanghai Stock Exchange late last night.
The nation's third-largest bank by market value said in a statement to the Hong Kong Stock Exchange earlier yesterday that the bank noted the recent movement in the shares and is "not aware of any reasons for such movement."
In the statement, the bank said there were no negotiations or agreements relating to intended acquisitions or other matters requiring disclosure under Hong Kong's securities laws.
"We are expecting disclosure on its subprime related assets and the impact on its 2007 performance," said Qiu Zhicheng, a Haitong Securities Co analyst.
BOC is the country's biggest owner of subprime mortgage securities. It said in October they accounted for 3.05 percent of its total holdings and it had set aside US$473 million for potential writedowns.
Earlier this year, US financial giants like Citigroup and Merrill Lynch reported huge billions of US dollar losses due to the subprime-related crisis which worsened in the fourth quarter, leading to global stock turmoil.
There were concerns that the crisis will also spill over into banks like BOC which also held subprime-related loans.