China’s banks are taking their lumps from losses on trading mortgage-related securities, even while the strong domestic economy is boosting profits.
Bank of China reports a larger than expected $1.3 billion of subprime writedowns while Industrial & Commercial Bank of China, the world’s largest bank by market capitalization, reported $400 million-worth. Bank of China says it has sold down its exposure to subprime mortgage-related mortgages to $5 billion from $9.5 billion in August. ICBC says it holds $1.2 billion of such securities, the same level as last June.
Both banks were announcing their 2007 results: net income up 65% at ICBC and 31% at Bank of China. The average for China’s 14 publicly traded banks is 70%.
That number will shrink substantially this year as the government turns the screw on bank lending as it tries to damp down inflation.