Bank Of China Will Merge 10 Hong Kong Units In October

by Mary Swire, Tax-News.com, Hong Kong

03 September 2001

Announcing a 6.2% rise in first half profits from its Hong Kong and Macao operations, the Bank of China said it was on track to form a combined bank from its ten Hong Kong units by October.

Bank of China, which has about 40 percent of its assets in Hong Kong and Macao, won Hong Kong legislative approval in July for the merger, which will create Bank of China (Hong Kong) Ltd, the second-biggest Hong Kong-incorporated lender. The new bank will serve as a springboard for its expansion in the region.

The Beijing-based lender said pretax profit at the units rose to $5.05bn ($647m) in the six months through June 30. Net interest income fell 3.7 percent to $7.9bn, while fee income fell 15% to $2.15bn. Earnings rose because the bank cut provisions against bad loans by 27% to $17.9bn. The bank said about 10.5%, or $36.9bn of loans were bad at the end of June, down from 15.3% a year earlier.

'The merger of 10 banks is unprecedented in either Hong Kong or the world', said Liu Jinbao, the bank's Hong Kong and Macao Chief Executive. The Hong Kong unit will eventually sell shares to the public, though the bank said no timetable has been set. "The bank will keep considering the market environment but there's no further comment I can make right now," said Mr Liu.

Rivals HSBC Holdings PLC, which owns the two biggest Hong Kong banks, earlier said first-half profit rose 4%, beating analysts' expectations of a 5% fall. Like Bank of China, HSBC reduced loan provisions, and also profited from asset sales.

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