Money

CCB profit growth to continue rising

By Wang Xiaotian (China Daily)
Updated: 2011-03-29 10:43

A China Construction Bank Corp branch in Shanghai. [Photo / Bloomberg]

BEIJING - China Construction Bank Corp (CCB) will continue to increase profits at a rate of more than 20 percent year-on-year, despite tightening macroeconomic polices and a rising awareness of risk control, said Chen Zuofu, vice-president of the bank, on Monday.

"As the government tightens the monetary stance, the scale of lending for us and other market players will show some decline this year. We will explore new services and bolster an increase in revenue through fees and other intermediate business to maintain a strong growth momentum," he said at a media briefing in Beijing.

He said the bank's new-yuan lending this year will decrease by 4 percent to somewhere between 700 billion yuan ($107 billion) and 750 billion yuan.

According to its annual report released on Sunday, the bank realized net profit of 135 billion yuan in 2010, representing growth of 26.39 percent. Its total assets amounted to 10.8 trillion yuan by the end of the year, an increase of 12.33 percent from a year earlier.

Zhang Jianguo, the bank's president, said revenue from the net interest margin contributed 52 percent of total revenue, while fees and commissions were 20.3 percent and gains from investments accounted for 27.7 percent. Revenue from fees and commissions rose by 37.6 percent year-on-year.

The bank will maintain a prudent management style and will make risk control a priority in 2011, said Chen.

By the end of last year, the bank's outstanding loans to local government finance vehicles totaled around 540 billion yuan, said Zhang, 65 percent of which can be completely covered by the cash flow. Less than 10 percent of the loans are basically covered by cash flow, and more than 3 percent are half-covered.

"The major risks lie in loans to railway and road construction projects," said Chen, who added that he is "optimistic" about cleaning up these loans. The bank has already cut outstanding loans to these finance vehicles by 140 billion yuan in the two months since the beginning of this year, and will refuse to furnish further loans to county level financial vehicles

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The bank's Chief Risk Officer Huang Zhiling said every lender is currently examining its loans to the Ministry of Railways. According to the China Banking Regulatory Commission, by the end of 2011 banks will have to prepare a provision at a rate of 120 percent for financial vehicles loans to local governments that cannot be covered by cash flow and without sufficient support from collateral.

After raising more than 61 billion yuan from the A- and H-share markets last year, the bank's capital-adequacy ratio reached 12.68 percent and core capital-adequacy ratio totaled 10.4 percent, exceeding the regulator's requirements and establishing a solid capital foundation to counter risks, said Zhang.

"I'm sure that this year we won't raise money in the markets again. I hope in the next few years we can maintain sound capital-adequacy conditions," he said.