Subprime crisis exposure wakes up risk control
Updated: 2008-03-17 11:44
CCB, which owns US$1.062 billion subprime-related bonds and assets, says its revenue won't be affected by the crisis since the assets are a very small amount, accounting for only 0.12 percent of the bank's total assets and 1.96 percent of it net assets.
CCB says its subprime bonds account only for 2.75 percent of its total investment in foreign exchange bonds.
"CCB did incur a loss from the investment if calculated at the current market value of the securities," says Zhang Jianguo, president of the bank. But he says that the loss is well within CCB's capacity to handle.
He also says the US subprime bonds it held had high credit ratings of A or above, and more than 80 percent were rated AAA.
Analysts say the high ratings of its bonds exposed CCB to low risk from the credit crisis.
Wang Qian from Industrial Securities forecasts that the loss from the subprime bonds will only reduce CCB's 2007 EPS (earning per share) by 0.01 yuan.
ICBC said its subprime mortgage-backed and related securities were valued at $1.228 billion, accounting for 0.1 percent of its total assets and 1.68 percent of its net assets.
The bank had allocated 30 percent risk reserve - $61 million - to cover the losses from the subprime debts.
Jiang Jianqing, chairman of ICBC, says the bank's subprime debts will not deeply affect the bank.
Analysts say the loss from the debts will decrease ICBC's 2007 EPS by about 0.02 yuan.
BOC, the largest holder of the US subprime-related assets, owns $7.947 billion of subprime debts, accounting for 0.95 percent of the bank's total assets, and 12.70 percent of its net assets.
However, because the bank has actively improved its subprime-related portfolio and sold the comparatively risky part of the debts, its subprime assets have been greatly reduced.
The bank had disposed of all its subprime-related collateralized debt obligations (CDO), a high risk subprime bond, and set aside risk reserves of 1.15 billion yuan to cover losses from the subprime crisis.
But even for BOC, the loss for the 2007 EPS from the subprime assets is only 0.05 yuan, analysts forecast.
