ICBC inks bad loan agreement with Huarong
By Feng Jie (China Daily)
Updated: 2005-06-01 09:47

The Industrial and Commercial Bank of China (ICBC) signed an agreement with China Huarong Asset Management Company late last week to transfer some of its bad loans.

The 246 billion yuan (US$29.6 billion) of bad loans, classified as "losses," are being transferred to Huarong, but the process may take three to four months, an official with Huarong said yesterday.

The official declined to say how his company would dispose of the bad loans, but said it would use "diversified and professional methods."

State-owned ICBC, China's largest lender, received a US$15 billion capital infusion in April in preparation for an initial public offering, and is currently undergoing a joint-stock restructuring.

It was the third of the nation's Big Four State-owned lenders to win State approval for joint-stock reform. The Bank of China and China Construction Bank won approval at the end of 2003, while the Agricultural Bank of China is still awaiting the green light.

The Big Four transferred a combined 1.4 trillion yuan (US$168 billion) of non-performing loans (NPLs) to four asset management companies in 1999, including 400 billion yuan (US$48 billion) from the ICBC to Huarong.

The ICBC reportedly plans to sell the remainder of its 700 billion yuan (US$84 billion) of non-performing loans in a public auction later this month.

The bank also needs to issue bonds to bring up its capital adequacy ratio, currently at 6 per cent, to meet an internationally accepted minimum requirement of 8 per cent.

Prior to the approval of its restructuring plan, the ICBC said it was planning to issue about 100 billion yuan (US$12 billion) in subordinated bonds, the proceeds of which could be used to replenish its capital base.

The bank has not formally disclosed its bond issue plan after the restructuring was approved, but sources said earlier the bank's target is little changed.

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