The Banking and Strategy Initiative

Chillin' out till it needs to be funded

China Crisis Highlights: Bank of China

[$1,000,000 = 6,830,000 RMB = CNY 6,830,000]

The series name may be a little objectionable to the regulars. it is however the choice of China to consider its policy for banking in 2010 based on the same headlines of late 2009 and early 2010. Counting CNY (RMB) 1.4 trillion in residential mortgages, the banks issued new loans for $1.4 Trillion in 2009 and though they crossed Japan and came out second in Global GDP, it seemed a little hot under the collar for the nation of closed door policymakers and much to borrowers chagrin, currently a block is in place, raising CRR rates for select banks like ICBC and restricting further lending. In fact, just today, loans have been called back, starting with bills discounted last month. Short Term financing from Bill discounting is likely contributing oto speculation in the Property market and in stocks. Chinese Banks still ended January with CNY 1.1 T in loans. The State’s Investment arm CIC invests in the Big 4 through the Central Huijin Investment Ltd company, so it has no direct stake in the banks. It recently picked up 30 million shares in ICBC and 5 million shares(Shanghai issue)  in Bank of China to take its stake to 67.5% in Bank of China. The state’s stake in ICBC and CCB is similarily 35% and 57% respectively.

Bank of China is a part of the Hang Seng Finance sub Index and the S&P Asia 50. ETFs on the latter are likely based on the S & P Global 1200 (AIA in the US). Bank of China is also part of the SSE50 on the Shanghai Exchange. New Equity is planned to be issued only on the Hang Seng in Hongkong. 8.4%  of its equity after the 2006 IPO was co-owned by RBS and billionaire Li Ka Shing. It also issues banknotes in Hongkong and Macau. It raised $9.7 billion in the 2006 IPO. The troubled UBS holds 1.3% in the bank’s equity.

Bank of China is a part of the big 4 but as the smallest, landed bank limits of CNY 600 billion or $88bn in the new regime, of which it has lent the most in January, a total of 23% of the limit or $20 billion already with clients in approvals and disbursals.

Bank of China as a player is also likely geared towards activity in Hong kong and leads the Big 4 in Foreign Exchange Lending. It is planning a capital issue of $5.86 billion or RMB 40 billion in 3% coupon Bonds ( 6 yr Convertible Bonds with coupon near 3% ) based on the early credit expansion which it has then scaled back at CBRC’s insistence. The bond issue will likely sail through along with another Rights issue by March 2010.  BOC is the largest lender in China after ICBC and thus the most affected by the curbs.

It is opening branches in Taiwan in this year and expanding corporate business in the US with ‘Mega Finance’

The ex SIA investment Singapore Aircraft Leasing is now a BOC company listed as BOC Aviation.  It had a 2009 agreement with Financial One to increase business in the SME space and opened a South American branch also in 2009 in Brazil. It has reported RMB 200 billion or $29 in Interest Income in the first nine months and may report results this week after getting them checked with CBRC. The asset base in the meantime is expected to be RMB 8.6 T at end 2009 and RMB 8.760 T this month or $1.3 T

This time they seem to have found the hole in their discount tiers in residential mortgages..i know some swiss and Europenan Banks that still haven’t looked.

References:

CBRC calling back loans

BOC.CN

WSJ China on Mortgages

BOC Wiki

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This entry was posted on February 3, 2010 by in China, Emerging Markets, Financial Markets, Global, Uncategorized and tagged , , , , , .

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