Three more lenders show exposureto Lehman - ResearchInChina

Date:2008-09-19liaoyan  Text Size:

THREE more Chinese banks have disclosed their exposure to the failure of Lehman Brothers, but analysts say the impact is mainly psychological and will not have a major impact on their bottom lines.

Industrial Bank said yesterday in a statement to the Shanghai Stock Exchange that it had exposure valued at US$33.6 million via investments and transactions with Lehman Brothers, which filed for bankruptcy protection in New York on Monday.

The bank, partly owned by Hong Kong-based Hang Seng Bank, said it had yet to set aside provisions against the losses.

Bank of China also stated yesterday that it had US$128.8 million exposed to Lehman Brothers.

The bank held US$75.6 million in bonds issued by Lehman, and its New York branch had extended US$53.2 million in loans to the failed titan.

The exposure amounted to 0.01 percent of the bank's total assets by the end of June, BOC said.

Bank of Communications, the fifth biggest bank in China, said late yesterday that it has Lehman exposure of US$70.02 million, accounting for 0.02 percent of its total assets by the end of June.

"We don't expect the exposure to cast a big blow to our assets," the Shanghai-based bank said.

Limited impact

Earlier in the week, two other Chinese lenders revealed their exposure to Lehman Brothers.

Industrial and Commercial Bank of China said on Wednesday that it held US$151.8 million worth of Lehman bonds, while China Merchants Bank disclosed an exposure of US$70 million.

"We expect that more banks, including China Construction Bank, also hold Lehman-related bonds, but their exposure should be limited," Qiu Zhicheng, a Haitong Securities Co analyst, said yesterday in a research note.

The impact on the profits of the banks involved should be limited to within 2 percent of their 2008 performance, he said, adding that the recent tumble of stocks in the banking sector is due more to the cut in lending rates, which has put an end to expectations of a continuous growth in banks' profits.

Even unlisted banks stepped forward to clarify their involvement with Lehman assets.

Bank of East Asia (China) said it has no investment linked to Lehman Brothers, but it did hold some products linked to Merrill Lynch, whose fire sale to Bank of America has assured its stability.

BOC closed 2.69 percent higher in Shanghai at 3.05 yuan (45 US cents), while Industrial Bank ended the day 4.06 percent higher at 14.37 yuan.

The benchmark Shanghai Composite Index tumbled 1.72 percent to close at 1,895.84.

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