China Dev Bank 2011 profits rise 23 pct, bad loans down

BEIJING, Apr 25: China Development Bank (CDB), Beijing’s financing arm for big infrastructure projects, posted a 22.9 percent rise in net profit in 2011 to 45.6 billion yuan ($7.23 billion), the bank said in its annual report published on Wednesday.

The policy bank has come under the spotlight as it is an active lender to Chinese companies that expand overseas or seek resources from abroad.

The bank’s net profit figure makes CDB the sixth most profitable bank in China, behind the five biggest banks deemed ‘systemically important’ by regulators, with earnings boosted by an increase in its financing margin.

CDB said its non-performing loan ratio dropped to 0.4 percent at the end of 2011 from 0.68 percent from a year ago.

CDB, which has a sovereign status in the onshore bond market, had a net interest rate gap of 204 basis points in 2011, up from 185 basis points in 2010, as it raised low-cost funds from the interbank system and lent heavily to government-backed projects such as roads and railways.

The bank said last week that it would issue 1.055 trillion yuan of bonds in China’s debt market in 2012, a slight drop from 1.065 trillion issued last year.

CDB is the second-largest bond issuer in China’s interbank market, next only to the Treasury, accounting for 20.8 percent of total bonds issued last year.


CDB, with 6.25 trillion yuan in assets, is regarded as a policy bank that subordinates profitability to serving government interests, despite a cabinet-level reform programme launched in 2008 to gradually remove the bank’s sovereign guarantee and make it a commercial bank.

Chen Yuan, CDB chairman and the son of Chinese revolutionary leader Chen Yun, said in the annual report: ‘In 2012, the world economic situation remains complicated with rising uncertainty and instability in the economy…But the long-term trend of positive growth in the Chinese economy has not changed.’

The bank is owned by three entities – the finance ministry with 50.18 percent, Central Huijin Investment Ltd at 47.63 percent, and China’s national pension fund with 2.19 percent.

The bank’s outstanding foreign exchange loans were $187.3 billion by end of 2011, including a loan of 325 million euros to China’s Suntech Power Holdings to build 150 solar energy power stations in Italy.

CDB provided 80 million euros to Jiangsu Jinsheng to buy a 50 percent stake in German machine tool maker EMAG and it pledged $400 million in loans to the Karara iron ore project in Australia, in which Angang Steel has a stake.

CDB is also playing a pioneer role in promoting the yuan abroad. The bank is expected to provide 10 billion yuan worth of loans to Russia, India, Brazil and South Africa in an important cooperation mechanism for the efforts of BRICS nations to reduce the use of the dollar in global trade.

CDB said the outstanding value of its overseas yuan loans had reached 61.5 billion yuan as the end of 2011. ($1 = 6.3073 Chinese yuan) (agencies)