BOC cuts subprime securities
Updated: 2008-03-06 11:19
Bank of China Ltd (BOC), the Chinese lender with the largest portfolio of subprime-related investments, has sold some of those securities, Chairman Xiao Gang said.
The Beijing-based bank disposed of all its collateralized debt obligations, Xiao said yesterday in Beijing. The company reported owning $7.95 billion of subprime securities on Sept 30, with $496 million in the form of CDOs. Xiao declined to disclose how much subprime-related debt the bank still owns.
"It will be in everybody's interest to find out what exactly they are holding," said Dominic Chan, an analyst at CLSA Asia-Pacific Markets, in an interview.
BOC's stock has fallen 36 percent since Oct 30, when its profit trailed that of rivals because of losses on its subprime-related investments. Financial institutions around the world face $400 billion of write-offs and credit losses related to the subprime mortgage slump, according to Group of Seven estimates.
The bank, the nation's third biggest, may have to write down the value of overseas securities by 35 billion yuan, analysts at BNP Paribas SA have estimated. BOC said last month its 2007 profit would continue to see "record growth".
Chan has maintained a "sell" rating on BOC since late August. At the time, the company said it held almost $9.7 billion of subprime-backed securities.
"I don't expect solid guidance from Chinese management" on the details of the banks' subprime-related investments, Chan said, adding that investors should prepare for more provisions from BOC should the US economy deteriorate in 2008 and 2009.
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