Bank of China 3988

[winston]

BOC has US$20b on Fannie, Freddie debt: CLSA
(07-16 17:54)

Bank of China (3988) may own about US$20 billion (HK$156 billion) of debt issued by Fannie Mae and Freddie Mac, representing two-thirds of total holdings among the six largest Chinese banks, according to by CLSA.

The Freddie Mac and Fannie Mae investments would amount to about 2.6 percent of total assets at Bank of China, the nation's third-biggest, CLSA analysts said.

That compares with 0.09 percent at larger Industrial & Commercial Bank of China (1398), they said.

ICBC may have US$1 billion of securities linked to the two beleaguered US home loan companies, while China Construction Bank (0939), the second largest, may have US$7 billion of such holdings. China CITIC Bank may own US$1.4 billion of agency debt, CLSA said.

Source: Bloomberg

[winston]

Not vested.

BOC investor seeks up to HK$544m

An investor in Bank of China (3988) is seeking to raise up to HK$544 million in a share placement, according to a term sheet obtained by The Standard.

An undisclosed seller is offering 156.784 million shares in the mainland lender for HK$3.38 to HK$3.47 a piece, according to the term sheet.

The price range represents a discount of 0.9 percent to 3.4 percent to the morning session closing price of HK$3.50.

UBS is the sole bookrunner for the sale.

Source: The Standard HK

[millionairemind]

Bank of China block changes hands
By Anette Jönsson | 22 July 2008

The undisclosed seller raises $68 million from the transaction, which is completed during the lunchtime break.

A fourth straight day of gains on the Hong Kong market seems to have raised the confidence of some investors wanting to secure a bit of profit. Or perhaps the sudden pick-up in activity reflects a fear that the gains won’t last.

Either way, Hong Kong saw a second small placement yesterday – alongside International Business Machines’ fifth sell-down in Lenovo Group – as an undisclosed institutional investor sold HK$533 million ($68 million) worth of shares in Bank of China. The deal, which was arranged by UBS, was launched and completed during the two-hour lunch break after the share price gained 3.2% in the morning session. This was possible because the transaction accounted for only 0.2% of the outstanding share capital and no more than half a day’s trading volume, making it easy for the market to absorb.

The fact that the investor chose to hire an investment bank to handle the sale through a block trade rather than to trickle it out through the market, is in line with a trend that has been running for most of this year. “Institutions use block trades to take away market risk. Right now we are seeing a bounce in the market, but there is no way of knowing how long it will last,” says one observer.

The investor sold 156.784 million shares, which is believed to have been its entire holding, or very close to it. They were offered at a price between HK$3.38 and HK$3.47, or at a 0.9% to 3.4% discount to the morning close of HK$3.50. According to a source, there was some price sensitivity around the 2.9%-3% discount level, and the final price was set at HK$3.40 for a 2.9% discount. Still, it must be viewed as encouraging that the deal didn’t price right at the bottom, as has been the case with so many other placements over the past few months.

The source says the book was covered within 30 minutes but was kept open for another hour and was eventually multiple times subscribed. It attracted about 40 investors in all. Not surprisingly, given the time of day, the buyers were predominantly Asian but included a few European names as well.

Bank of China’s share price is currently trading 16.5% above its mid-March low of HK$2.96 and is up by about the same amount since its May 2006 initial public offering, which was priced at HK$2.95. If the undisclosed investor has held on to the shares since then, it could still be sitting on a respectable profit. The buyers, on the other hand, are likely to have focused on the fact that the share price has dropped 34% from the early November high of HK$5.19 and that 18 analysts covering the stock still have a buy recommendation on it. The other eight analysts all rate it a “hold”. The consensus target price is HK$4.43, implying 30% upside from the placement price.

The share price fell 5 HK cents to HK$3.45 after the transaction yesterday afternoon, but held above the placement price and gained 1.8% on the day. Meanwhile, the Hang Seng Index added 3% yesterday, bringing the total gain in the past four sessions to 1,358 points, or 15.6%.

Before yesterday’s two block trades there had been only one other share placement by a Hong Kong-listed company in the past month – a small $45 million sell-down in renewable energy firm China Power New Energy Development last week by a company owned by China Power’s vice-chairman and a former executive director. CLSA arranged the trade, which was priced at the bottom of the indicated range for a 10% discount.

However, bankers say there could be a few more transactions over the next few days as investors take advantage of the improved sentiment triggered by better-than-expected second quarter earnings from several large US banks, including JPMorgan, Citi and Bank of America. BoA reported before the start of US trading yesterday and contributed to a stronger opening on Wall Street. After two hours of trading, the key indexes were largely flat, however, signalling that last week’s impressive 3.6% gain in the Dow Jones index may be coming to an end.

[winston]

Not vested.

35pc growth tipped for BOC
Katherine Ng, The Standard HK

Bank of China (3988), the last mainland bank to announce first-half results, is expected to post the lowest earnings growth due to a diminishing net interest margin and continued markdowns in subprime-related holdings.

The mainland's largest forex lender is expected to report on Thursday a mere 35 percent growth to 40.5 billion yuan (HK$46.3 billion), from last year's 29.54 billion yuan, according to the average forecast of four analysts surveyed by The Standard.

BOC is expected to report a quarter- on-quarter drop of 12 percent in the second quarter on a 12 basis points narrowing of the net interest margin, said Sherry Lin, banking analyst at Credit Suisse. Credit Suisse forecasts BOC to report a weaker-than-peers' profit growth of 37.7 percent to 40.69 billion yuan.

BOC would also have set aside an additional 3.75 billion yuan to cover possible losses for subprime and Alt- A mortgage-related investment, after booking impairment charges of 1.828 billion yuan by the end of the first quarter, according to Lin.

Slowing loan growth in its Hong Kong subsidiary BOC (Hong Kong) (2388), which contributed 23.2 percent during last year's first half, may drag down BOC's results, said Citigroup banking analyst Simon Ho. Ho has the most bearish view on BOC's earnings - forecasting only 26 percent growth - on larger-than-expected subprime markdowns.

Source: The Standard HK

[kennynah]

i wonder if one of the most advantaged banks in the world, BoC, with almost mandatory china customer base, cannot make money or leverage on their large deposit base...then which company in china can make it?

[winston]

BOC profit leaps 42pc to 42b yuan beating forecasts
Katherine Ng, The Standard HK

Bank of China (3988), the mainland's largest foreign exchange bank, yesterday said its net profit for the first half rose 42.8 percent to 42.18 billion yuan (HK$48.08 billion) - beating analysts forecasts - as rising impairment losses were offset by its fast-growing fee income business.

Meanwhile, BOC Hong Kong (2388), its 66 percent owned subsidiary, posted a below-expectation 5.1 percent drop in earnings to HK$7.09 billion, due to a larger-than-expected writedown on US asset-backed securities.

The Hong Kong unit declared an interim dividend of 43.8 HK cents per share.

The Beijing parent did not declare any dividend.

Both weighted by US subprime- related holdings, BOCHK has adopted a "very prudent" policy to increase its impairment loss to cover even AAA prime assets, amounting to a total HK$2.15 billion net charge.

"It does not mean the subprime woe will extend to AAA assets, but we prefer to prepare for the most rather than less," said Raymond Lee Wing-hung, executive director and chief financial officer at BOCHK.

Chief executive He Guangbei said the market will remain uncertain and volatile during the second half and BOCHK may need to further charge losses for its subprime holdings.

The local bank has net charge of HK$655 million for Alt-A securities and HK$1.914 billion provided for prime residential mortgage-backed securities - the first ever in banking history - and booked HK$420 million net writeback during the period.

It still holds HK$1.2 billion subprime-related assets, and HK$5.5 billion Freddie Mac and Fannie Mae assets, as at the end of June.

Net interest income at BOCHK in the first half rose 12.6 percent to HK$10.03 billion from HK$8.9 billion a year ago, with net interest margin steady at 2.03 percent.

Net fee income climbed 10 percent to HK$2.9 billion.

Meanwhile, parent BOC posted the weakest earnings growth among its peers in the first half, with a total of US$10.64 billion set as provision offsetting the fast-growing fee income.

BOC vice chairman and president Li Lihui said BOC is more vulnerable than other Chinese banks as it was more exposed to the global market.

Loan growth was 13.8 percent. Net interest income rose 14.8 percent and non-interest income surged 99.1 percent.

Source: The Standard HK

[winston]

Bank of China Posts Slowest Profit Growth in 2 Years (Update2)
By Luo Jun and Chia-Peck Wong

Oct. 29 (Bloomberg) -- Bank of China Ltd., the nation's largest foreign-exchange lender, said profit rose at the slowest pace in two years as credit-market losses increased and loan demand declined in China.

Net income climbed 11.5 percent to 17.8 billion yuan ($2.6 billion) in the three months ended Sept. 30 from 15.9 billion yuan a year earlier, the Beijing-based firm said in a statement today. Writedowns on securities tied to subprime mortgages and other U.S. credit investments widened to $3.6 billion.

Bank of China has lost more on mortgage investments than all Chinese banks combined after a global crisis that has triggered more than $660 billion in losses and almost 150,000 financial job cuts worldwide. The bank also was hurt as China's economy expanded at the slowest pace in five years in the third quarter.

``Bank of China has never really been favored by investors,'' said She Minhua, a Shanghai-based analyst at China Securities Co. ``When the economy was booming it benefited less as overseas operations accounted for a large part of its business, and when the credit crisis hit, it bore the brunt.''

Rival Industrial & Commercial Bank of China Ltd. boosted net income by 26 percent in the quarter, the smallest since going public two years ago, and profit growth at China Construction Bank Corp. dropped for two straight quarters to 12 percent. The two largest Chinese banks posted a combined $2.7 billion in write-offs on overseas investments as of Sept. 30.

Earnings per share at Bank of China rose to 0.07 yuan a share in the quarter from 0.06 yuan previously.

Slowing Economy

Shares in Bank of China have dropped 55 percent in Shanghai and 47 percent in Hong Kong over the past year. Bank of China trades at 0.9 times forecast end-2008 book value, below the average 1.2 times among the nation's six-largest, publicly traded banks in Hong Kong, according to data compiled by Bloomberg. Citigroup Inc., the biggest U.S. bank, has a price- to-book multiple of 0.6.

China's cabinet has increased infrastructure spending and cut taxes for exporters and home purchasers, and the central bank has reduced interest rates twice since September to stimulate the economy.

The central bank has also attempted to slow yuan appreciation against the dollar since mid-July to protect export jobs. The yuan has climbed 6.7 percent against the dollar this year, making it the best-performing Asian currency.

``The economic outlook is pretty gloomy and that's a barometer for banks,'' said Wang Xu, an analyst at China Universal Fund Management Co. ``Corporate defaults have spread to bigger publicly traded companies from small, private firms.''

About half of China's toymakers have shut down this year, with 7,000 workers losing their jobs when Smart Union Group Holdings Ltd. closed factories in Guangdong province this month, state media say. A quarter of the 70,000 Hong Kong-owned businesses in the Pearl River Delta region may go bust, the Federation of Hong Kong Industries estimated this month.

Subprime Debt

Losses on overseas credit investments have stymied attempts by Bank of China Chairman Xiao Gang, 50, to catch up with rivals that avoided the contagion because of a domestic focus.

Bank of China said it held $6.2 billion of debt issued by Fannie Mae and Freddie Mac as of Sept. 30, and $3.75 billion of mortgage-backed securities guaranteed by the two largest U.S. home loan providers. It held $1.38 billion of securities backed by so-called Alt-A mortgages and $4.34 billion of other ``non- agency'' home loan investments.

The Chinese bank wrote down the value of subprime assets by $96 million in the quarter. The bank has booked $562 million of losses on securities tied to Alt-A loans to date, and another $1 billion on other mortgage investments. It also charged an impairment allowance of $110 million on loans to and debt issued by the failed Lehman Brother Holdings Inc.

The bank said it would ``continue to follow developments in international financial markets'' and assess impairment on related assets in ``a prudent manner,'' in today's statement.

Interest Income

Bank of China operates 689 overseas outlets, six times more than ICBC, the world's largest bank by market value. Operations abroad accounted for 43 percent of Bank of China's profit in 2007, compared with 3 percent for ICBC.

Net interest income, or income earned on loans after deducting interest paid for deposits, rose 3 percent to 40.7 billion yuan. Fees and commissions gained 1 percent to 9.5 billion yuan. The bank expanded loans by 15.7 percent in the first nine months to 3.2 trillion yuan.

Royal Bank of Scotland owns 8.25 percent of Bank of China, Temasek Holding Pte owns 4.13 percent and UBS AG holds 1.33 percent.

Chinese banks may drop another 15 percent to 20 percent in the next six to 12 months as they start to ``lose the delusion of a `healthy and sustainable' growth story in China and confront the rise of systematic credit risk'' from the fourth quarter, Dorris Chen, a Hong Kong-based analyst at BNP Paribas SA, wrote in a note on Oct. 22.

Source: Bloomberg

[winston]

Deutsche Bank on Thursday cut the target price for Bank of China (3988.HK: Quote, Profile, Research, Stock Buzz) shares to HK$2.25 from HK$3.08, but maintained a hold rating after the Chinese bank posted disappointing results for the third quarter.

Deutsche Bank said in a research note that it cut its earnings estimates on the Chinese bank by between 7.4 percent and
17.4 percent to 68.4 billion yuan ($10 billion) and 79.5 billion yuan for 2008 to 2010, to reflect a more conservative outlook and higher credit costs.

Shares of Bank of China ended at HK$2.02 on Wednesday.

[winston]

UBS of Switzerland Sells Shares in Bank of China (Update2) By Ambereen Choudhury

Dec. 31 (Bloomberg) -- UBS AG, Switzerland’s biggest bank, sold its stake in Bank of China Ltd. to raise cash as a three-year lockup period ended today.

Zurich-based UBS said in a statement that it sold 3.4 billion H-shares to professional investors. UBS earned a profit of approximately $400 million from the sale today, said a person familiar with the terms, who declined to be identified.

The bank “remains committed to its business relationship with Bank of China and to its business in China as a whole,” it said in the statement. “It’s a normal action” by UBS after the lock-up period expired, said Wang Zhaowen, Bank of China’s Beijing-based spokesman. The sale “shouldn’t affect the bank’s share price since all its operations are doing well.”

UBS, which was handed a $59.2 billion aid package by the Swiss government and central bank this year, said in October it would sell units and cut staff to focus on the securities and advisory businesses. The bank has slashed 9,000 jobs since the credit crunch started and posted almost $49 billion in losses and writedowns, more than any other European lender.

It agreed to sell its agricultural and Canadian energy- commodities units to JPMorgan Chase & Co. this month.

Bank of China fell in Hong Kong trading earlier on concern that Royal Bank of Scotland Group Plc and three other strategic investors, including UBS, might sell their stakes as the lockup ended. In 2005, UBS paid $500 million for 1.6 percent of Bank of China, the country’s third largest.

Royal Bank of Scotland is the second-largest shareholder in Bank of China with an 8.25 percent stake, while Temasek Holding Pte, UBS and Asian Development Bank hold a combined 5.7 percent in the Beijing-based lender. The investors, except for Temasek, are required to notify Bank of China of their disposal plans in advance and must maintain the “stability” of Bank of China’s shares, according to agreements with the lender.

Source: Bloomberg

[millionairemind]

Looks like every1 is selling BOC.. they know something we don't??

Li Ka-shing Seeks $524 Million Selling Bank of China (Update2)
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By Bei Hu and Luo Jun

Jan. 7 (Bloomberg) -- Hong Kong billionaire Li Ka-shing is raising as much as HK$4.06 billion ($524 million) selling shares in Bank of China Ltd., the nation’s third-largest bank by market value, according to a stock sale document.

Li’s Magnitico Holdings Ltd. is offering 2 billion shares in the Beijing-based bank to institutions at HK$1.98 to HK$2.03 each, according to the document, which was obtained by Bloomberg News. Bank of China shares closed at HK$2.14 today. Merrill Lynch & Co. is managing the sale.

Source: Bloomberg