Bank of China Group, the country's largest foreign exchange bank, said on Friday it earned 57 billion yuan (US$6.9 billion) in operating profits last year before setting aside provisions for bad assets.

The profit represents an increase of 4.8 billion yuan (US$573.4 million) or 9.11 percent compared with a year ago.

By the end of last year, the bank's non-performing loans (NPLs), by the international standard of five category classification, stood at 15.92 percent, a drop of 6.45 percentage points compared with a year ago.

The greater profits, which can help boost the bank's capital base, are another piece of good news for the bank, which plans to go public before the end of 2005.

At the end of last year, the bank got a US$22.5 billion injection from the state to increase its capital adequacy.

The bank, together with China Construction Bank, has been chosen by the state to pilot the joint-stock restructuring.

"China's four largest state-owned commercial banks, also including the Industrial and Commercial Bank of China and the Agricultural Bank of China, will have to sharpen their competitive edge before foreign banks can enter China without restrictions at the end of 2005," said Niu Li, a senior economist with the State Information Center.

They will also have to lower the rate of NPLs, get rid of historical financial burdens and raise their capital adequacy to international standards, Niu said.

The Bank of China is now the only state bank with a capital adequate ratio of more than 8 percent, according to bank spokesman Wang Zhaowen.

"The asset restructuring is just part of the bank's overall restructuring plan, which is being implemented and is listed as the most important work for the bank in 2004," he said. "Restructuring is more important than going public."

The plan covers restructuring in business, organization structure, management procedure, IT, human resources, and even corporate culture.

"Our focus on business restructuring is to make our service more market-oriented and customer-centered," he said.

Such restructuring not only includes big moves such as classifying the business into three departments -the retail, corporate and financial institutions business departments, but also extends to details such as the redesigning of bank deposit receipts to make them more customer-friendly and renovating outlets.

To simplify management procedures, the Bank of China will also centralize its international settlement business.

Meanwhile, more efforts will be poured into the restructuring of its computer centers.

(China Daily January 17, 2004)