Tuesday, January 22, 2008

Bank of China's subprime hit: up to $2 bil

--Analysts estimate that the state-owned lender Bank of China, traditionally the most international of the country's big banks, may have to write off a quarter of the nearly $8 billion it holds in securities backed by subprime mortgages. --Bank of China's total exposure to U.S. subprime investments is the largest among Asian financial institutions, and any sizable write-down could rattle already-anxious investors. Chinese stocks have fallen this year in part because of concerns that banks -- market heavyweights in China -- won't be able to sustain their strong earnings gains. --Losses are a sore point for China's big banks. In recent years they have quieted doomsayers from the 1990s who predicted that huge bad loans eventually would cripple the nation's economy. Bank of China, for instance, in 1999 recorded nonperforming loans of $71 billion -- or 39% of its total loans. --The bank's U.S.-mortgage exposure became clear in August, soon after the subprime crisis began, when the bank reported holdings of $9.65 billion in the area. But the bank also said it expected losses to be small, because it held only assets with high credit ratings. Then, in October, it said the value of its portfolio of such securities had fallen to $7.95 billion and it had set aside $322 million for losses in the third quarter.

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