The Bank of Communications (BoCom), China's fifth largest lender, had the best financial performance last year among 13 domestic nationwide commercial banks.
On Monday the Banker, a professional financial magazine affiliated with the Chinese Academy of Social Sciences, published its 2005-2006 ratings for domestic commercial banks, relating to their financial results and overall competitiveness.
BoCom was listed on the
Hong Kong Stock Exchange in June, the first overseas-listed mainland bank. It recorded a net profit of 6.73 billion yuan (US$838 million) for the first nine months of 2005, reversing a loss of 667 million yuan (US$83 million) compared to the same period of 2004. Its capital adequacy ratio rose to 11.52 per cent, compared with 11.29 per cent when the bank floated its shares in Hong Kong.
"It is because we have successfully introduced foreign strategic investors, restructured our corporate frame and improved corporate governance," said Wang Bin, vice-president of BoCom. The bank also came second in the ratings related to overall competitive strength.
China Merchants Bank, another joint-stock commercial bank, was rated the most competitive among all Chinese commercial banks.
According to the magazine report, all joint venture banks do much better than State-run banks. The State-run Bank of China only came fourth and eighth respectively relating to financial results and overall competitiveness. The Agricultural Bank of China (ABC) ranked 12th among the 13 commercial banks in both areas, only better than the Guangdong Development Bank.
As the first of the country's Big Four State-owned banks to seek overseas listing, the
Hong Kong listed China Construction Bank (CCB) came in second for its 2005 financial results and fifth for overall competitive strength.
"It proves that bank reforms run by the State are heading in the right direction and we should continue with them," said Wang Songqi, leader of the Banker's research team.
"The aim of State-owned banks' going public is not just to get funds, but also for transparency in operations, to enhance competitive capability, introduce supervision systems and streamline internal controls," Wang said.
Luo Zhefu, vice-president of CCB, did not agree with the rating. Luo said the bank had undergone great changes in 2005, hinting that CCB could get a better score. "But the rating will be an important reference," he said.
Industrial and Commercial Bank of China, China's largest State owned commercial bank, was not listed in the ratings because the bank is being restructured and its data being audited.
Even though joint venture banks show better financial results and competitiveness, they may face more difficulties than State-owned banks due to a lack of capital sources, the Banker report pointed out.
China has promised to fully open its banking industry to foreign competition by late 2006 under commitments made as a part of its entry into the WTO. This means all the commercial banks' capital-adequacy ratios must be above 8 per cent, the international accepted standard, at the end of the year.
Statistics from the Banker show that until the third quarter of 2005, 10 of the 14 commercial banks' capital-adequacy ratio had reached the 8 per cent standard.
ABC and Guangdong Development Bank's capital-adequacy ratios are still minus, being -5.07 per cent and -17.37 per cent.
With a massive input of State funds, State-owned banks have been able to raise their capital-adequacy ratios and improve their balance sheets by substantially reducing bad loans. Non-performing loans owed to China's commercial banks were reduced to an all-time low of 8.9 per cent at the end of 2005, from 13.2 per cent in 2004.
"State-owned banks may have favourable policies and capital sources from the government, but other joint venture banks must fight for their own ways to raise more money," The Banker said.
It also warned banks to pay attention to potential risks, as they tend to concentrate their loans in the real estate, manufacturing and communication sectors. "Once bubbles occur in those sectors, banks will be exposed to high risks," said Wang Songqi.
