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Agricultural Bank of China Posts 40 Percent Increase in First-Half Profit
Agricultural Bank of China Ltd., reporting its first earnings since completing the world’s biggest initial public offering, said first-half profit gained 40 percent on loan growth and widening margin.
Net income climbed to 45.8 billion yuan ($6.74 billion), or 0.17 yuan a share, from 32.7 billion yuan, or 0.13 yuan, a year earlier, the Beijing-based company said in a statement to the Hong Kong stock exchange today.
Agricultural Bank joins state-owned rivals Industrial & Commercial Bank of China Ltd. and China Construction Bank Corp. in posting profit growth in the first six months. It forecasts it will earn at least 82.9 billion yuan in 2010. China’s biggest lender by customers this month completed a $22.1 billion IPO as Chairman Xiang Junbo braved a stock-market rout, a slowing economy and the risk that loans will sour.
“ABC’s credit-quality risk is inherently higher than its big-bank peers,” Citigroup Inc.’s Hong Kong-based analysts Simon Ho and Paddy Ran wrote on Aug. 26, initiating a “buy” rating for the stock. The bank “has relatively more room for earnings to improve given its much higher starting base for the cost-to-income ratio and credit cost,” they said.
Agricultural Bank had a 37 percent ratio of costs to income in the first half, compared with an average 30 percent at its three largest competitors.
Shares of Agricultural Bank have advanced 11 percent in Hong Kong from the IPO price since debut on July 16. The benchmark Hang Seng Index has risen 1.7 percent.
Last to Market
The lender is the last major Chinese bank to sell shares to the public, wrapping up a decade-long overhaul of the nation’s banking industry that cost the government an estimated $650 billion in bailouts and restructuring programs. With 9.695 trillion yuan of assets as of June 30, it’s the nation’s third- largest lender by assets.
The bank had 4.62 trillion yuan of loans outstanding at the end of June, an increase of 12 percent from Dec. 31. Non- performing loans accounted for 2.32 percent of advances as of June 30, the highest among the nation’s 16 publicly traded banks.
The lender on Aug. 23 issued an order to branches nationwide to freeze lending to property developers for a week as it reviews outstanding loans to the industry, according to people familiar with the matter.
Agricultural Bank set aside 19.6 billion yuan to cover potential bad loans in the first half, boosting its coverage ratio to 136 percent, below the minimum 150 percent required by the nation’s banking regulator.
Growth Slows
China’s economic growth slowed to 10.3 percent in the second quarter from 11.9 percent in the previous three months. The country’s policy makers are grappling with risks posed by last year’s credit boom, which fueled the nation’s recovery from the global recession.
Agricultural Bank’s net interest income rose 33.2 percent to 111.7 billion yuan, while income from fee-based services gained 32 percent to 22.5 billion yuan.
Set up in 1951 by Mao Zedong to finance rural cooperatives, Agricultural Bank was the first Chinese commercial lender established during Communist rule. It had 320 million domestic customers and 23,624 outlets at the end of 2009, more than any other Chinese bank.
--Luo Jun, with assistance from Winnie Zhu. Editor:
To contact Bloomberg News staff of this story: Luo Jun in Shanghai at +8621-6104-7021 or jluo6@bloomberg.net
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