The sub-prime crisis hit China's flagship lender yesterday as Bank of China wrote down $322m (£156m) for its holdings of US sub-prime mortgage securities.
The state-run bank has the biggest exposure to the US sub-prime meltdown, with about $7.9bn of asset-backed bonds and collateralised debt obligations (CDOs). It had already taken a $153m charge on those assets in the first half of the year.
Bank of China is the most international of China's banks, getting about 35 per cent of its business from outside the mainland, compared with less than 5 per cent at its bigger rival ICBC. The bank's diversification, however, means it has dil-uted the benefits of China's rampant economic growth, which was 11.5 per cent in the third quarter.
"Considering the inherent uncertainties of the US sub-prime mortgage market, the group will closely monitor the future developments of the market," the bank said yesterday.
Third-quarter profit rose 22 per cent to 15.9bn yuan (£1.03bn) but growth still lagged far behind that of rivals such as Bank of Communications, which announced a near doubling of profit yesterday.
"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, a fund manager at HSBC-Jin Xin Fund Management, told Bloomberg.
Bank of China has more than 600 overseas branches and operations in 27 countries, including Britain and the US. The company's shares have lagged those of its major rivals since it rep-orted its exposure to the US sub-prime mortgage market two months ago.
Royal Bank of Scotland owns about 4.5 per cent of Bank of China, which is its partner in the world's fastest-growing major economy. The UK bank booked a big profit when Bank of China sold shares in an initial public offering last year.Reuse content