Banking

ICBC reduces local government loans

By Cai Xiao (China Daily)
Updated: 2011-03-31 11:05

A branch of Industrial and Commercial Bank of China (ICBC) Ltd in Beijing. The bank's overseas network now covers 28 countries and regions with 203 branches abroad. [Photo / Bloomberg]

BEIJING - Industrial and Commercial Bank of China (ICBC) Ltd, China's largest bank by market value, said on Wednesday that loans to local governments have been reduced and that it will continue to expand abroad by setting up four more branches.

Yang Kaisheng, the director of ICBC, said that lending to project developers controlled by local governments has decreased to 515 billion yuan ($78.5 billion) from 650 billion yuan.

"Sixty-three percent of the loan projects totaling 515 billion yuan have the ability to pay in cash," said Yang, "So local governments only have a risk exposure of 212.5 billion yuan."

Yang added that of the projects worth 212.5 billion yuan, 60 billion yuan worth of the projects can pay 30 billion in cash.

"Therefore, we are confident that we can control the risks on these loans," Yang said.

By the end of 2010, the ratio of non-performing loans (NPL) through ICBC's local-government financing platform was 0.3 percent. ICBC's overall NPL ratio was 1.08 percent, down 0.46 percent from 2009.

The bank's profit before tax amounted to 215.4 billion yuan in 2010, an increase of 28.8 percent from the previous year.

In 2010, the amount of domestic loans provided by ICBC's branches rose to 898 billion yuan, a 16.9 percent increase and below the average industry increase.

Jiang Jianqing, the chairman of ICBC, said that the amount of new loans in 2011 will range from 820 billion yuan to 850 billion yuan, and the loan growth rate will be kept between 13.2 percent and 14.2 percent.

Jiang said the bank will open branches in India, Pakistan, Brazil and Peru.

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He added that it will also consider setting up branches in South Asian countries along the Mekong River.

ICBC's overseas network now covers 28 countries and regions with 203 branches abroad whose assets totaled 75.7 billion yuan. In January, five branches were set up in Europe, including in Paris.

Agricultural Bank of China (AgBank) Ltd also said on Wednesday that it believes local governments have the financial strength to pay loans.

The bank said it has no need to raise money in the coming two years because of its strong business performance. AgBank's full-year profit climbed 46 percent to 94.9 billion yuan after its July IPO bolstered capital, allowing it to lend more.

The bank also said it is applying to foreign regulators to upgrade four overseas offices to branches.

These include offices in the United States, Japan and South Korea.

"We will set up more overseas offices and branches to help Chinese enterprises going abroad," said Yang Kun, vice-president of AgBank.