The Industrial and Commercial Bank of China (ICBC), the country's largest lender, posted a net profit of 33.7 billion yuan (US$4.2 billion) last year, a year-on-year increase of 12 percent, according to its 2005 annual report released yesterday.

 

The bank, which is planning to float on the Hong Kong stock market later this year, said in the report that its outstanding non-performing loans (NPL) amounted to 154.4 billion yuan (US$19.3 billion) at the end of last year, or 4.69 percent of its total lending, a sharp drop from the previous year's 16.47 percent.

 

The lender's capital adequacy ratio hit 9.89 percent and its core capital adequacy ratio reached 8.11 percent at the end of 2005, the report showed.

 

"It is an upbeat annual report, which shows that the new management structure and operation process introduced by the bank during its restructuring efforts worked," said Zhang Xi, a banking analyst with China Galaxy Securities.

 

"All those figures show that ICBC's asset quality has improved remarkably thanks to its restructuring efforts in the past year," said Wu Yonggang, a banking analyst with Guotai Jun'an Securities.

 

Both analysts agree that the report casts a positive light on ICBC's Hong Kong stock listing later this year.

 

"The report will definitely shed a positive light on its upcoming stock listing," Zhang said.

 

The report, she said, is likely to help the bank get a better pricing when it is floated.

 

"Although its (ICBC's) net profit is slightly lower than that of China Construction Bank, as the country's biggest bank with the most extensive network, ICBC could have a better price," the analyst said.

 

"The report will strengthen that argument," she added.

 

The ICBC was restructured into a joint-stock lender last October and in January it picked up Goldman Sachs, Allianz Group and American Express as overseas strategic investors, who bought about 10 percent of the bank at a cost of US$3.78 billion.

 

"The improved operation and efficiency at the country's largest bank, which is shown in its report, is sure to boost foreign investors' confidence in China's banking reform and the industry as a whole," Zhang said.

 

The ICBC officially inaugurated its cooperation with Goldman Sachs in March, collaborating with the strategic investors in seven areas such as NPL management, asset management and staff training.

 

The bank announced last month that it would restructure its head office in a further bid to improve corporate governance and operational efficiency.

 

The revamp will focus on three areas corporate business, financial affairs and capital transaction and the bank will add 10 new departments, including credit approval and risk management, and will cut seven other divisions.

 

The bank's outstanding deposits stood at 5,66 trillion yuan (US$708 billion) by the end of last year, up 10.8 percent, a record increase for the lender, the report said.

 

Its outstanding loans stood at 3.29 trillion yuan (US$411 billion), an increase of 5.8 percent.

 

The lender spun off a total of 635 billion yuan (US$79.4 billion) NPLs last year during its financial restructuring.

 

The bank's assets reached 6,45 trillion yuan (US$806 billion) by the end of last year, up 28 percent from the previous year, according to the report.

 

(China Daily July 6, 2006)