By Jennifer Yousfi
Managing Editor
Bank of China Ltd. (PINK:BACHF) is denying earlier claims that it would report a loss for 2007 due to a potential $8 billion in write-downs resulting from exposure to subprime U.S. mortgage assets.
"The Directors wish to clarify that the views expressed in the article are unfounded, and the Bank is unaware of the source upon which such statements are based," Bank of China said a press release filed through the Hong Kong Stock Exchange yesterday [Wednesday], Reuters reported.
Citing unnamed sources close to mainland China's second largest bank [based on assets], South China Morning Post reported on Monday that the Bank of China's profits for 2007 would be much lower than expectations due to subprime losses. The paper even went so far to suggest the bank would be forced to take a loss, causing shares to tumble 6% the day the story ran.
However, analysts find it unlikely that Bank of China would write-down the entire $7.95 billion reported in the story. That amount represents the bank's entire subprime exposure, which will more likely be written down over the course of several quarters.
"Given the U.S. subprime crisis is getting worse, I expect Bank of China to raise its write-off to between $800 million and $1 billion in the fourth quarter," JP Morgan (JPM) banking analyst Samuel Chen told Forbes. "If the bank writes off more than $1 billion, there is a possibility that it will generate a fourth-quarter loss."
But that possibility is far from the certainty the South China Morning Post story seemed to suggest. The bank's statement assured investors that based on its, as yet, unaudited accounts, 2007 profits have grown from the prior year.
Bank of China is not scheduled to release full-year earnings until April.
News and Related Story Links:
- Forbes:
Bank Of China Slams Loss Rumors
- Forbes:
Bank Of China Blasted By U.S. Subprimes