THE Bank of China Ltd, the nation's largest foreign-exchange lender, yesterday said profit rose at the slowest pace in two years as credit-market losses increased and loan demand declined in China.
Net income climbed 11.5 percent to 17.8 billion yuan (US$2.6 billion) in the three months ended September 30 from 15.9 billion yuan a year earlier, the Beijing-based firm said yesterday. Earnings per share at the Bank of China rose to 0.07 yuan a share in the quarter.
Writedowns on securities tied to subprime mortgages and other United States credit investments widened to US$3.6 billion.
The Bank of China has lost more on mortgage investments than all Chinese banks combined after a global crisis that has triggered more than US$660 billion in losses and almost 150,000 financial job cuts worldwide. The bank also was hurt as China's economy expanded at the slowest pace in five years in the third quarter.
"The Bank of China has never really been favored by investors," said She Minhua, a Shanghai-based analyst at China Securities Co. "When the economy was booming it benefited less as overseas operations accounted for a large part of its business, and when the credit crisis hit, it bore the brunt."
Rival the Industrial and Commercial Bank of China Ltd boosted net income by 26 percent in the quarter, the smallest since going public two years ago, and profit growth at China Construction Bank Corp dropped for two straight quarters to 12 percent. The two largest Chinese banks posted a combined US$2.7 billion in write-offs on overseas investments as of September 30.
Shares in the Bank of China have dropped 55 percent in Shanghai and 47 percent in Hong Kong over the past year. The Bank of China trades at 0.9 times forecast end-2008 book value, below the average 1.2 times among the nation's six-largest, publicly traded banks in Hong Kong, according to data compiled by Bloomberg News. Citigroup Inc, the biggest US bank, has a price-to-book multiple of 0.6.