SHENZHEN: Shenzhen Development Bank (SDB), the mainland's only foreign-controlled listed lender, said it will maintain a stable growth this year despite the unfavorable international markets and tightening domestic financial policies.

People walk in and out of a Shenzhen Development Bank branch. Despite huge profits last year, the bank won't issue dividend payouts to shareholders. Zhang Ting

"Clearly, there are many economic concerns this year, especially in the international markets, as well as the factors in domestic market such as inflation and storms. But we have confidence in keeping the bank's credit balance," said Frank Newman, chairman of the mid-sized lender based in Shenzhen, at a press conference yesterday.

After achieving an 88 percent year-on-year growth in net profits last year, Newman said the bank will continue to strategically focus on retail lending, trade finance and intermediate markets, as well as build its deposit and fee business.

Compared with large corporations, small- to medium-sized enterprises (SMEs) are more willing to develop a long-term relationship with the bank, and they are more generous to its services since they have limited fundraising channels, said Newman, adding that the business from the middle market will make a bigger contributions to SDB.

According to its annual report released Tuesday evening, SDB achieved historically high net profits of 2.65 billion yuan in 2007, up 88 percent from 1.41 billion yuan in 2006.

The profit growth was mainly driven by growth in deposits and loans, improved interest spread, strong net-fee revenue growth, effective expense management, continuously improving credit quality, and a lower effective tax rate, said the bank.

Its net-interest income in 2007 increased by roughly 2.6 billion yuan, or 37 percent, from a year earlier.

Affected by the government's macro-control policies, SDB restricted its credit supply last year and focused on the SME market and personal lending, especially on mortgages for owner-occupied housing, Newman said.

The bank recorded 5.8 percent of its core capital adequacy rate (CCAR) at the end of 2007, reaching the regulatory requirement of at least 4 percent for the first time since 2003.

In order to raise the capital adequacy rate (CAR), which also stood at 5.8 percent, to the required 8 percent, the bank got approval to issue up to 7 billion yuan in subordinated debt.

However, there is no further information on Baosteel's intended acquisition of 120 million shares of SDB for 4.2 billion yuan, or at a price of 35.15 yuan per share, Newman told the reporters.

If the deal could be made, Baosteel, China's largest steel company, will become the second-largest shareholder of SDB, following New Bridge, which now holds a controlling 16.7 percent stake in the bank.

The shares of SDB closed up 7.33 percent to 29 yuan yesterday.

However, some investors complained that the company did not offer a dividend plan despite the earning-per-share reaching 1.27 yuan last year.

"The employees of SDB become the only beneficiaries of the improved performance of the bank who enjoy higher salaries, bonuses and better treatment. It's unfair," said Ye Jia, an investor.

(HK Edition 03/21/2008 page2)