Bank of China sheds 4.14% on writedown talk

Bank of China Ltd, which has the largest subprime-related holdings among Asian banks, fell yesterday after BNP Paribas SA said it may have to write down the value of overseas securities by 35 billion yuan.

The bank, China's third largest, fell 4.14 percent to 6.25 yuan in Shanghai, while its H shares closed down 6.39 percent to HK$3.37.

Larger rivals Industrial and Commercial Bank of China Ltd and Construction Bank Corp also declined. ICBC fell 3.82 percent to 7.56 yuan in Shanghai yesterday. And Construction Bank slipped 4.14 percent to 9.02 yuan.

Bank of China's H shares has dropped more than 30 percent since Oct 30, when it reported profit growth that trailed competitors because of losses on its $7.95 billion of subprime-related investments.

The country's flagship foreign exchange lender is expected to announce the writedown when it reveals its full-year results in April, the South China Morning Post yesterday quoted mainland banking sources as saying.

The report cited banking sources as saying that senior banking regulators had already warned the mainland leadership that Bank of China and two other State banks would have to make provisions for all of their exposed subprime-related assets.

The Industrial and Commercial Bank of China had subprime exposure of $1.23 billion and China Construction Bank had $1.06 billion.

"That BOC only provisioned $473 million for $7.95 billion subprime exposure is far from comforting," Dorris Chen, a Shanghai-based analyst at BNP Paribas, wrote in a note on Friday.

She said Bank of China may write down 17.5 billion yuan for the fourth quarter of 2007, and an equal amount for this year.

Chen reiterated her "hold" rating on the stock and lowered her target price for Bank of China to HK$3.30 from HK$3.51. Bank of China officials weren't immediately available for comment.

Bank of China held $7.45 billion in subprime asset-backed securities and $496 million in collateralized debt obligations as of Sept 30, representing 2.86 percent and 0.19 percent, respectively, of its total securities holdings.

It made a net profit of 45.5 billion yuan for the first three quarters of 2007 and booked $322 million for the third quarter to account for its exposure to US subprime mortgaged-backed bonds.

The bank's stock closed at HK$3.31 on Jan 16, the lowest since its June 2006 initial public offering.

Agencies

(China Daily 01/22/2008 page15)