China Bank cuts bad loans, hikes capital ratio

Tighter monitoring led to a drop in listed China Banking Corp.'s (China Bank) bad loans last year, improving its ratio to its total loan portfolio, the bank said on Monday. China Bank told the Philippine Stock Exchange its bad loans dropped by P1.46 billion, leading to a better bad loan ratio of 4.14 percent last year from 5.19 percent in the prior year. The ratio of its loans to deposits stood at 61.2 percent. The bank said its financial position remained solid, with total capital funds increasing by P1.92 billion to P27.52 billion, translating to a capital adequacy ratio — a measure of a bank's financial health — of 12.32 percent. This was above the minimum regulatory requirement of a tenth. The bank posted double-digit growth in net profits last year on the back of higher sales and interest margins amid improving market conditions. China Bank said its net income grew by 42.5 percent to P2.83 billion. "Last year, most banks benefited from the turnaround in market conditions following the previous year’s global financial crisis. We are pleased that China Bank managed to weather the storm and we were still able to pursue our expansion plans as programmed," China Bank President and Chief Executive Peter S. Dee said. Revenues rose by almost a fifth to P16.69 billion, while interest margins improved by 0.3 point to 4.1 percent. Fee-based revenues, meanwhile, went up by 81 percent to P3.59 billion. China Bank said its loans grew by a tenth, while investments in securities rose by a third, supporting the increase in net interest revenues. However, its outstanding gross loans slightly dropped to P101.7 billion last year from P104.38 billion in the prior year. It increased its provision for loan losses by 83 percent to more than half-a-billiom pesos, bringing its loan loss coverage ratio to 122.21 percent, it added. China Bank’s main business includes lending to corporations, small and medium enterprises; housing and car loans; treasury and foreign exchange trading; trust and investment management; and insurance products. It also offers Internet banking and mobile banking, as well as inward remittances through tie-ups with remittance firms and exchange houses in the Middle East, Asia and major US cities. China Bank said the higher profits had improved the bank’s return on equity — a measure of how well a company used reinvested earnings to generate additional earnings — to 15.49 percent last year from 11.98 percent in the prior year. Return on assets, which measure a firm's profitability, rose to 1.84 percent from 1.53 percent. The bank's loans grew by a tenth, while investments in securities rose by a third, supporting the increase in net interest revenues. However, its outstanding gross loans slightly dropped to P101.7 billion last year from P104.38 billion in the prior year. Its total resources expanded by more than a tenth to P230.83 billion as deposits expanded by a similar rate to P191.69 billion last year. Last year, China Bank opened 32 branches, 27 for the main bank and five for China Bank Savings. It also invested in new automated teller machines (ATM) and technologies. China Bank and China Bank Savings the year with 247 branches and 380 ATMs. — Norman P. Aquino, GMANews.TV