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BIZCHINA / Center

Bank president: Subprime 'won't hurt' CCB

By Mao Lijun (China Daily)
Updated: 2007-08-28 10:13

China Construction Bank (CCB) said its revenue won't be affected by the
US subprime crisis as it has only a small amount of US mortgage-backed
securities.

CCB, one of the Big Four State-controlled banks, held US$1.06 billion
worth of US mortgage-backed and related bonds at the end of June,
accounting for 2.75 percent of its total investment in foreign exchange
bonds, it said in its interim report yesterday.

"CCB did have a loss from the investment if calculated at the current
market value of the securities," said Zhang Jianguo, president of the
bank. "But the loss is not significant enough to seriously affect revenue
and is well within CCB's capacity to bear."

Zhang said the bank held US$460 million in US subprime mortgage-backed
bonds, accounting for less than half of its total investment of $1.062
billion in US mortgage-backed and related bonds.

He said the US securities it held had high credit ratings of A or above
and more than 80 percent were rated AAA.

Analysts said the high ratings of its securities exposed the bank to low
risk from the credit crisis.

CCB, which posted a 47.5 percent increase in net profit for the first
half, said yesterday it had set aside US$180 million for potential losses.

Its net profit rose to 34.25 billion yuan for the January-June period, up
11.03 billion yuan over the same period last year, the bank said
yesterday.

"If the US subprime mortgage market situation becomes more serious in the
future, CCB will consider increasing the capital in provision," Zhang
said.

A meltdown in the US subprime mortgage market triggered a global credit
squeeze that has roiled markets over the past few weeks.

The Industrial and Commercial Bank of China said its subprime
mortgage-backed and related securities were valued at US$1.23 billion by
the end of June, accounting for 0.3 percent of its total securities
investment and 4.32 percent of its foreign exchange investment portfolio.

(For more biz stories, please visit Industry Updates)

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