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China CITIC Bank to rejig loan portfolio in H2

By Wang Bo (China Daily)
Updated: 2009-08-29 09:06

China CITIC Bank Corp, the banking unit of the nation's largest investment firm, will scale back lending growth in the second half and focus on adjusting credit composition, said a senior official of the bank on Friday.

"The bank expects to transform some 80 billion yuan ($11.71 billion) to 100 billion yuan bill discount credit it extended so far this year into normal loans in the second half, which will help direct more capital to the real economy," Wang Kang, general manager of the bank's budget and accounting department, said at the release of the first half results.

As the government signaled its intentions to free up lending to revive the economy this year, the mid-sized lender's new loans rose 323.8 billion yuan, or 49 percent in the first half from the end of last year.

The Beijing-based bank, controlled by State-owned financial conglomerate China CITIC Group, saw its net profit drop 16 percent to 7.05 billion yuan in the first half mainly on narrowing interest margins.

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Net interest income fell 18 percent to 15.01 billion yuan in the first six months, as net interest margin, a gauge measuring a lender's profitability, fell nearly 1 percentage points for the period following aggressive interest rate cuts by the central bank in late last year, the bank said in its first half results.

"We expect the bank's profitability will keep improving in the second half, as we assume the interest spread may have touched a trough in May and the massive lending in the first half will put the bank in a better position in terms of profit growth," Wang said.

After rapid credit expansion in the first half, the bank saw its bad loan ratio drop to 0.99 percent at the end of June, compared with 1.36 percent at the end of last year, while capital adequacy ratio dropped to 12.04 percent from 14.32 percent over the same period.

"We have no fund raising plan this year, as the bank's capital base is adequate presently, but we might seek channels to boost tier 2 capital next year," Wang said.

CITIC Bank plans to open two new branches in northeastern and western China's Changchun and Urumqi in the second half following the three branches launched in the first half, which will increase the lender's outlets across the nation to some 600.