SHANGHAI: Shanghai Pudong Development Bank's
first-half net profit rose by 30.83 per cent to 1.60 billion yuan (US$200
million), or 0.41 yuan (5 US cents) per share, on the strength of a widening
profit margin between loan and deposit rates.
Analysts expect the Shanghai-based bank to continue its growth momentum in
the remainder of the year to reap an annual net profit of around 3.2 billion
yuan (US$400 million).
The bank is the third-largest publicly traded lender on the Chinese mainland
after Bank of China and China Merchants Bank.
Its first-half performance, announced last weekend, is within analysts'
expectations.
"The bank performed well because of the widening margin between loan and
deposit rates. Its interest margin is now over 4 per cent according to my
calculation and has the potential to rise further," said Li Yamin, a banking
analyst with Shenyin Wanguo Securities.
China's central bank raised the benchmark one-year lending rate by 27 basis
points from 5.58 per cent to 5.85 per cent in April this year to cool off the
fast-growing economy, but left deposit rates unchanged.
Widening profit margins, however, have so far outweighed the effect of the
lending rate hike in curbing loan demand for commercial lenders, analysts said.
In the first half of 2006, Pudong Development's total loans rose by 14.21 per
cent over the end of last year to reach 430.82 billion yuan (US$53.85 billion),
the bank said in a statement filed to the Shanghai Stock Exchange.
Its non-performing loans ratio continued to drop to 1.82 per cent by the end
of the first half, below the industry average.
"A negative side of the bank's asset quality is the relatively high
percentage of loans made to the real estate sector, where risk control is
particularly called for," said Li.
Real estate loans accounted for around 11.41 per cent of the bank's lending,
it said in the statement.
Earlier in the year it was reported that Pudong Development had granted 32
questionable home loans totalling 126 million yuan (US$15.75 million). The bank
confirmed the report in June, but said it had not incurred any losses as it had
discovered the problem in time, taking in dozens of luxury Shimao Rivera Garden
apartments as mortgages.
Like the other commercial lenders, Pudong Development is also expanding its
intermediary business, which involves trading financial instruments such as
insurance policies and corporate bills and generating income from commission
fees.
Its intermediary business grew rapidly to as high as 95 per cent to generate
fees income of 420 million yuan (US$52.50 million), the bank said. But revenue
generated from the business accounted for just 3 per cent of the bank's total
revenue income.
The lender's capital adequacy ratio continued to drop to 8.01 per cent at the
end of the first half, slightly over the required ratio of 8 per cent.
Pudong Development plans to issue another 700 million shares by the end of
the year to improve its capital, Shanghai Securities News quoted senior official
Shen Si as saying.
Citibank, which holds a stake of about 4 per cent in Pudong Development, has
not yet expressed an intention to increase its holding, the paper quoted Shen as
saying.
Shen was also quoted as saying the bank is considering co-operating with
insurance companies in order to develop a comprehensive package of financial
products and services.
In a separate development, the bank appointed Fu Jianhua, former board
chairman of Bank of Shanghai, as its new president.
The bank's shares dropped by 0.32 per cent yesterday to close at 9.23 yuan
(US$1.15), while the benchmark Shanghai Composite Index dropped 2.19 per cent to
close at 1570.74 points.
(China Daily 08/15/2006 page10)
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