Bank of China 2006 net profit up 65 pct on strong opg income, lower tax - UPDATE |
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Thu, 22 Mar 2007 13:37
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HONG KONG (XFN-ASIA) - Bank of China reported a 65 pct rise in 2006 net profit to 42.83 bln yuan under international accounting standards, citing strong operating income, improved credit costs and lower tax.'The substantial improvement in profit after tax for the year was attributable to robust growth in operating income, improved operating efficiency, effective management of credit costs and a decrease in the effective tax rate,' the bank's chairman Xiao Gang said.The bank, one of the mainland's big four lenders, reported net interest income of 121.27 bln yuan for 2006, up from 101 bln a year earlier, while operating income rose 18 pct to 148.4 bln yuan.'This increase was primarily due to the continued increase in the average balances of loans and investment securities, as well as an increase in average yields,' it said.Earnings per share stood at 0.18 yuan, against 0.14 a year earlier.Vice chairman and president Li Lihui said at a media briefing following the results announcement that the management expects earnings growth this year to be slower than last year as the group's earnings this year will not be boosted by the one-off tax relief measure offered by the government last year.He said China's finance ministry last year approved a measure which enabled Bank of China to treat salaries paid to employees as tax deductible.'We expect our business to continue doing very well in the coming years, but the (earnings) growth rate this year will likely be slower than last year's because the tax relief was a one-off measure,' Li said.Xiao, meanwhile, said that the lender's Hong Kong unit will continue playing a vital role in the group's push for expansion and that the two entities will not compete head-on against each other even if the Hong Kong unit expands into the mainland.'Bank of China and its Hong Kong unit operate in different markets and they will complement each other when the latter enters the China market,' he said.'Bank of China Hong Kong faces challenges from foreign banks here and it needs to enter the China market for expansion. Through our synergy and collective resources, we could provide a multi-diversified platform and leverage on each other's strengths as we expand in the mainland,' Xiao said.On the prospects for further expanding the group's overseas business, Li said that Bank of China has no specific acquisition target at the moment.But he said that the bank is set on further enlarging its overseas business by instituting improvements in a host of areas, including infrastructure, management and information technology.General manager Wang Zhaowen took exception to media reports which suggested that Bank of China might be asked to facilitate the release of some 25 mln usd in North Korean deposits that were frozen earlier at Macau's Banco Delta Asia following US sanctions.The US has accused the Macau bank of being involved in illegal North Korean money laundering activities, but it announced earlier this week that the money could now be released.Wang said that Bank of China has not been asked by anyone to handle the transfer of the North Korean funds.'Bank of China is a listed bank and we abide strictly to international law,' he said, adding that the bank will not engage in any money-laundering activity.Executive vice president Zhu Min, meanwhile, admitted that the bank suffered a 9.8 bln loss in its foreign exchange investments as a result of the yuan's appreciation against the US dollar.He said the lender has already reduced its foreign exchange exposure to 15.7 bln usd as of end-December from 25.8 bln usd in the same period in 2005.'We are trying to reduce further our forex exposure and we have adequate risk controls. We don't expect this loss to have any significant impact on our finances,' he said.He noted that the forex loss is somehow being cushioned by the fact that returns on US dollar denominated assets are higher than those in yuan-denominated assets.'We are now in talks with our partners on how we can achieve a further reduction of our forex exposure,' Zhu said.The bank declared a final dividend of 0.04 yuan a share.leonora.walet@xfn.comlw/jc/rc
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