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Pudong Bank FY net profit up 5.4%

By Zhou Yan (China Daily)
Updated: 2010-01-06 08:04

Shanghai Pudong Development Bank (SPDB), a medium-sized commercial bank, said its net profit grew 5.4 percent to 13.2 billion yuan ($1.93 billion) last year.

The lender, which is partly owned by Citigroup Inc, also said 2009 revenue rose 5.43 percent to 36.4 billion yuan in a full-year preliminary statement to the Shanghai Stock Exchange yesterday. Earnings per share was 1.62 yuan, the company said.

"Chinese banks' earnings growth, which rely heavily on net interest income, slowed significantly in 2009, when the gap between lending and deposit rates narrowed," said Zhang Jing, an analyst at China Minzu Securities.

The central bank reduced the one-year benchmark deposit rate by 0.27 percentage points in December 2008. Since then, the rate has been unchanged to stand at 2.25 percent.

Shares of SPDB edged up 0.76 percent yesterday to end at 21.35 yuan. The stock more than doubled from a year earlier, if compared with a 50 percent gain in the country's largest lender, Industrial and Commercial Bank of China.

SPDB's non-performing loan (NPL) ratio was down 0.4 percentage points to 0.8 percent in 2009 from the previous year, the statement said.

Last July, Liu Minkang, chairman of China Banking Regulatory Commission, urged domestic banks to lift their bad-loan reserve ratio to 150 percent from 134.3 percent to mitigate the mounting risks on the back of Chinese banks' lending spree in 2009 that resulted in more outstanding loans.

During the first 11 months of last year, Chinese banks extended a total of 9.21 trillion yuan in new loans, 5.06 trillion yuan more than that a year earlier.

In addition, the low capital adequacy rate of SPDB also deterred it from reporting strong growth in 2009, said Lin Feng, an analyst at Guojin Wealth Management Center.

The Shanghai-based lender has raised 15 billion yuan via a private share placement completed last October, issuing 904 million new yuan-denominated shares at 16.59 each to eight institutional investors and one individual investor, excluding Citigroup, which had a 3.8 percent stake in the bank before the deal.

According to Xiangcai Securities' estimation, the private placement will lift the bank's core capital adequacy ratio to 6.76 percent from 2008's 5 percent.

The banks' earnings performance is expected to see improvement going forward in anticipation of an interest rate hike.