Bank of China reports better performance
By Su Bei (China Daily)
Updated: 2005-04-19 08:49

Bank of China, the country's largest foreign exchange bank, said yesterday its pre-tax profits rose a year-on-year 45.8 per cent during the first quarter of this year.

Spokeswoman Zhou Ning said the bank's pre-tax profits stood at 19.2 billion yuan (US$2.3 billion) during the January-March period, an increase of 5.1 billion yuan (US$614 million) or 45.8 per cent from a year ago.

And non-performing credit dropped 0.42 of a percentage point from the beginning of the year to 4.67 per cent at the end of March, she told a press conference.

By the end of March, the bank's capital adequacy ratio had exceeded 8 per cent.

"The bank had a good start in the first quarter and its business efficiency continued to improve," said Zhou.

The performance suggests the on-going shareholding reform has had a positive impact on the bank's development, said Wang Zhaowen, another spokesperson.

The bank, he said, had completed the first step of shareholding reform, which it completed with financial reshuffling in the second half of last year.

"We are now on the second step of the reform, to improve our corporate governance," he said.

But Wang refused to be drawn on how long it would take the bank to complete this step, which it must do in order to be listed - the final step.

Bank President Li Lihui said late last year the Bank of China would list shares in the second half of 2005 at the earliest.

Improvement of the financial strength, rather than going for an initial public offering, should be the top priority, he said.

With the aim of increasing the bank's capital strength, optimizing capital structure and diversifying ownership, the bank plans to usher in foreign companies as strategic investors.

However, talks with potential investors were still ongoing, Wang said, declining to give further details.

The bank reaffirmed yesterday its efforts to tighten risk control in the coming months, following a number of scandals earlier, including the disappearance of 290 million yuan (US$34.9 million) from one branch.

In January, the bank announced that one of its sub-branches in Heilongjiang Province had been involved in a fraud case.

Gao Shan, an official of the sub-branch, vanished following the disappearance of 290 million yuan (US$34.9 million).

The scandals have negatively impacted the bank's reputation, said Wang.

"It suggests our internal control system and corporate governance are far from perfect," he said. "That's why we are conducting the share-holding reform."

According to Zhou Ning, Bank of China had carried out a thorough examination of all business operations during the first quarter, in a move to find out where the loopholes are.

"We will try to solve the issue (loopholes) through strengthening internal controls," she said.

The Bank of China and China Construction Bank have been chosen by the central government as a pilot to turn them into joint stock banks.

The two won a US$45 billion capital injection from the State in December 2003.

Last August, the Bank of China reorganized itself into a joint-stock company named Bank of China Limited.

In September, China Construction Bank established a joint stock listing vehicle, following the division of the institution into two parts.