The Industrial and Commercial Bank of China (ICBC) is allocating a 30 percent risk reserve to cover possible losses in its subprime assets.
Jiang Jianqing, chairman of the country's largest commercial bank, said at a meeting over the weekend that last year ICBC held subprime assets of 1.2 billion U.S. dollars.
He said the bank's subprime holdings remained stable but risk reserves had been increased in the fourth quarter after supervisory departments issued warnings of a possible deterioration in the subprime crisis.
In its third quarter report, ICBC said it held subprime mortgage bonds of 1.228 billion U.S. dollars, for which it had allocated 429 million yuan (about 61 million U.S. dollars) in risk reserves.
The bank's shares rose by 0.50 yuan, or 7.43 percent, to close at 7.23 yuan on Monday, while the key Shanghai Composite index increased 8.13 percent.
ICBC had 8.6 trillion yuan in assets in September and generated 64.1 billion yuan in profit for the first three quarters of 2007, an increase of 66 percent over the corresponding period in 2006, according to the bank's financial report.
Of all the major commercial banks, Bank of China (BOC) and the ICBC are believed to be the top two investors in the U.S. subprime mortgage market.
In its half-year report, BOC said it held subprime mortgage assets of 8.965 billion U.S. dollars, of which 75.38 percent had AAA rating and 21.7 percent had AA rating. By the end of June, BOC had allocated risk reserves of 1.146 billion yuan to cover possible losses from the subprime assets.
Last month, investors rushed to sell BOC shares after a news report said the lender was likely to record a loss for 2007 due to subprime problems. BOC denied the hearsay and claimed it would see growing profit in 2007 without elaborating.
The bank's shares rose 0.37 yuan, or 6.93 percent, to close on Monday at 5.71 yuan.
(Xinhua News Agency February 5, 2008)