Bank of China Suspends Bad Debt Auctions In Rush For IPO
Wednesday, April 28, 2004 08:05 AM ET Printer-friendly version
BEIJING (Dow Jones)--State-owned Bank of China's race to purge its balance sheets of nonperforming loans ahead of a planned listing has prompted the bank to suspend auctions of bad debt in favor of speedier disposal methods, a bank executive said Wednesday.
The suspension affects a planned auction of a 6 billion yuan ($1=CNY8.28) distressed asset pool in southern Guangdong province, Bank of China's asset preservation department deputy head, surnamed Ruan, told Dow Jones Newswires.
"(We've) suspended all auctions from all branches (because) Bank of China is busy with disposal of bad assets to prepare for listing," Ruan said.
"One problem relating to auctions is they take too much time (but) time is pressing before Bank of China goes public, so we can't wait."
State Council approval of Bank of China's bad debt auctions was also in doubt, Ruan indicated, without elaborating. Ruan didn't rule out the possibility that the bank's bad debt auctions might resume in the second half of 2004.
Bank of China auctioned a portfolio of nonperforming loans valued at $1.8 billion to Citigroup Inc. (C, news) late last year.
Ruan said that Bank of China will reduce its nonperforming asset burden through more time-, cost- and resource-effective means including provisioning.
That decision reflects the bank's increasingly urgent efforts to significantly reduce its massive nonperforming loan burden ahead of a planned domestic listing in 2005.
The bank recorded a 1.44 percentage point decline in its bad debt ratio from the end of 2003 to 14.84% at the end of March. That ratio will shrink through gradual disposals to around 6% by the end of this year, a bank executive said in February.
The planned initial public offering will mark the climax of the bank's participation in a pilot state bank reform program that kicked off at the end of last year with the injection of $22.5 billion each from foreign reserves into both Bank of China and China Construction Bank .
The injections are aimed to accelerate ongoing restructuring ahead of an official end-September deadline and boost the banks' capital adequacy ratios. Policy makers intend to eventually extend the pilot reform program to Industrial & Commercial Bank of China and Agricultural Bank of China .
-By Phelim Kyne with Aiping Cui, Dow Jones Newswires; 8610 6588-5848; djnews.beijing@dowjones.com
-Edited by John Viljoen
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