Beijing bank's stake buy in line with expansion scheme

BEIJING, April 8 -- Bank of Beijing said Monday it has agreed to pay 127.5 million yuan (18.2 million U.S. dollars) for a 19.99-percent stake in Langfang City Commercial Bank.

Bank of Beijing, in which Dutch financial group ING holds 16.07 percent, said the investment returns on the Langfang Bank are likely to be more than 20 percent in three years. The Beijing bank will pay cash for the stake.

The investment is still pending approval from shareholders and the banking regulator.

Bank of Beijing, which also said Monday that its net profit jump 56 percent to 3.35 billion yuan last year, will second directors and experts to Langfang Bank to improve the smaller city bank's management and trim risk exposure.

Langfang Bank, based in northern Hebei Province close to Beijing, posted a net profit of 143.67 million yuan at the end of 2007.

The Beijing bank's investment is in line with its plan to grow beyond the city, and in fact it has already set up a foothold in Shanghai and Tianjin. The bank has regulatory approval to set up a branch in Xi'an, Shaanxi Province.

"The plan to expand out of Beijing can help the bank to enjoy higher interest spread as capital is adequate in Beijing" which has lots of major corporations, said China International Capital Corp in a report yesterday.

CICC expects the bank to expand to Hangzhou, Shenzhen and Chongqing by 2009.

As well as experiencing a growth in net profit, Bank of Beijing's revenue rose to 7.64 billion yuan in 2007, up 31 percent from a year ago.

CICC expects the bank to post a profit rise of 46 percent this year and a 29-percent jump in 2009.

Bank of Beijing's capital adequacy ratio topped 20.11 percent at the end of 2007, up from 12.76 percent a year ago. It is way above the regulatory minimum of 8 percent. Its bad loan ratio fell to 2.06 percent at the end of last year from 3.58 percent a year ago. Its provision against bad loans rose to 119.9 percent from 87.3 percent a year ago.

Shares of the bank ended 3.31 percent higher at 15.28 yuan yesterday in its Shanghai trading.

(Source: Shanghai Daily)