Experimental lending

25 March 2010 By John Foley Follow @johnsfoley

China’s biggest bank grew earnings by 16 percent in 2009, helped by rising markets and bad debts that turned back into good ones. A $3.6 billion convertible bond will keep its balance sheet healthy for now, but ICBC’s rapid growth brings risks even if they take years to appear.

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Industrial and Commercial Bank of China posted a 16 percent increase in earnings for 2009, a year in which it grew its stock of outstanding loans by 25 percent. ICBC also revealed plans to issue convertible bonds linked to its Shanghailisted shares, raising up to 25 billion yuan ($3.7 billion).

Income from lending, net of interest payments, fell 7 percent in 2009 to 246 billion yuan, but was partly offset by a 13 percent increase in fees and commissions. Provisions against bad debts roughly halved, leaving a nonperforming loan ratio of 1.54 percent, compared with 2.29 percent the previous year.

ICBC's core capital ratio, a mark of balance sheet strength, was 9.9 percent in 2009. Its capital adequacy ratio, a broader measure, was 12.4 percent. Regulators have guided large banks to maintain capital adequacy ratios of 11 percent. ICBC accounted for roughly a tenth of the total bank lending in China for 2009.

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