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Subprime loss hits BOC profit
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Bank of China Ltd said yesterday its third-quarter profit rose 22 percent, the slowest increase of the nation's top five banks, after a loss on sub-prime mortgage investments.


Net income climbed to 15.9 billion yuan (US$2.1 billion), or 0.06 yuan a share, from 13 billion yuan, or 0.05 yuan, a year earlier, the Beijing-based bank said yesterday. Growth slowed from 51 percent in the first half after a US$322-million writedown on United States securities linked to borrowers with poor credit.


Bank of China's US$7.9 billion of sub-prime-linked holdings crimped earnings expansion as rivals benefited from the nation's fastest economic growth in a decade. ICBC, China's largest bank, posted 76 percent profit growth for the quarter.


"Slower growth at overseas operations, exposure to sub-prime, and foreign-exchange losses, all of these added to the woes of Bank of China," David Liao of HSBC-Jin Xin Fund Management Co in Shanghai told Bloomberg News. "Investors are unwilling to give it the same valuation as ICBC."


Bank of China gets about 35 percent of profit from outside the Chinese mainland, compared with less than five percent for ICBC.


Bank of China held US$7.45 billion in subprime asset-backed securities and US$496 million in collateralized debt obligations on September 30, representing 2.86 percent and 0.19 percent of its total investment securities respectively.


(Shanghai Daily October 31, 2007)


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