Bank of Beijing Posts 57% Gain in Full-Year Profit

Bank of Beijing, China's biggest city bank, said profit rose 57 percent in 2007 as the nation's fastest economic growth in 13 years boosted demand for corporate loans and mortgages.

Net income climbed to 3.3 billion yuan ($470 million), or 0.63 yuan a share, from 2.1 billion yuan, or 0.43 yuan per share, in 2006, the Beijing-based company said in a statement.

City banks, barred from expanding outside their hometowns until 2006, raised funds last year to compete with larger, better-capitalized rivals that have no geographic limits. China's three publicly traded city banks averaged 53 percent profit growth last year compared with 75 percent for peers operating nationwide.

“Loan expansion is the sole engine powering Bank of Beijing and other city lenders' growth,” said Li Qing, a Shanghai-based analyst at CSC Securities. They missed out on big income gains from selling mutual fund products amid China's stock boom last year because their network is too small, he said.

“That will change gradually as city banks speed up expansion outside their home bases,” he said.

Bank of Beijing said it plans to pay 127.5 million yuan for 19.99 percent of Lang Fang City Commercial Bank in the northern Chinese province of Hebei. The transaction needs approval from shareholders and regulators, it said.

Bank of Beijing is the third of China's 113 city-commercial banks to go public, selling 15 billion yuan of shares in an initial public offering in Shanghai in September. Smaller rivals Bank of Nanjing Co. and Bank of Ningbo Co. raised a combined 11.1 billion yuan in domestic public offerings in July.

Bank of Beijing's lending grew 21 percent to 157 billion yuan last year and deposits increased 11 percent to 260 billion yuan. The bank aims to boost profit by 40 percent this year and loans will rise 15 percent, it said.

Bank of Beijing, the largest city bank by assets, operates 123 branches in the capital and one branch in neighboring Tianjin. The bank has 8.2 million accounts held by individuals.

ING Groep NV, the biggest Dutch financial-services company, owns 16 percent of the Chinese bank.

This is an extract from
Asian Banking and
Finance Magazine.

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