Friday, April 22, 2005
The central government recently approved ICBC's plan for restructuring, again in preparation for its eventual listing. To help ICBC in its restructuring, the central government will inject some 15 billion USD from its foreign exchange reserve (currently totally 659 billion USD) into ICBC to increase its capital adequacy ratio from the current 4.77% to around 6%. International financial rules typically requires a capital adequacy ratio of 8%. Is this injection any different from previous bailouts of Big Four state banks? What are the implications of this bailout?
First, the ICBC is in more trouble than were the Construction Bank and the Bank of China. Becacuse ICBC historically took charge of financiang SOEs, it still has an official NPL ratio of around 20%, or roughly 700 billion RMB. At the same time, its CAR is still relatively low. Thus, the State Council has to clean up ICBC in a two-part process, both likely involving injection from China's foreign exchange reserve. The current injection is merely the first step in a two-step process of preparing ICBC for listing. First, banks find a way to increase capital adequacy ratio, which in the case of CCB and BOC was accomplished through good-old-fashion profit accumulation. Both ICBC and BOC had capital adequacy ratio above 6% in early 2004, with BOC having a CAR well above 8%. In the case of ICBC, the central government sped up the recapitalization process with a forex injection and with issuance of subordinated debt. The second step will be to reduce the store of NPLs. It is in this second step that CCB and BOC received the 45 billion injection. The two banks also got to off-load some 350b RMB in NPLs to the AMCs. I suspect ICBC will undergo a similar process. With China's foreign exchange reserve continuing its upward climb, ICBC will enjoy another forex injection and, for sure, ICBC will transfer a big slice of NPLs to AMCs, probably around a half of their current NPLs, or 350 billion RMB.
Thus, ICBC enjoyed a greater "free lunch" than did BOC and CCB. While BOC and CCB have had to work hard to build up profit every year in order to bulk up their capital, ICBC now receives substantial injections with hardly any improvement . I think this is the wrong move on the part of the central government. Instead of speeding up ICBC's IPOs-- although I believe that the injection into the BOC and CCB was justifiable-- why not set profitability targets for ICBC in the next few years and allow ICBC to slowly build up a capital base? By speeding up restructuring with what will be two foreign exchange injections, the central government merely encourages ICBC officials to rely on central bailouts instead of working harder to change corporate structure and culture. Also, the global capital market will not have a large enough appetite to buy shares from all three banks in the near future anyway. Through this accelerated restructuring process, those in charge of finance are looking to increase their "administrative accomplishments" before the 17th Party Congress. Once again, politics trumps sound economic logic in China.
国务院批准中国工商银行股改方案
央视国际 2005年04月22日 16:38
中国国有商业银行的股份制改革可以说是今年最受中外瞩目的经济大事之一。除中行建行能否成功上市外，工行农行的股改如何进行最为引人关注。昨天晚上，工行的股改终于破题，国务院宣告，工行股改方案已经获得批准。这里是工商银行总行，从外面看这里和往常一样平静，但随着股份制改造方案的正式启动，这家占中国银行业总资产近1/5的巨无霸，将全面进行股份制改造，并把国有商业银行的改革从试点阶段推进全面攻坚。由于工行的不良资产数额相对较大，比重相对较高，因此这次国务院采取了不同于中行建行的注资方案。中行建行是分别注资225亿美元外汇储备作为资本金，原资本金全部用于冲销坏账；而这次工行的方案是，注资150亿美元外汇储备用于补充部分资本金，使核心资本充足率从目前的4.77%左右达到6%，再通过发行次级债补充附属资本，把总的资本充足率从目前的5.52%左右变为超过8%，基本达到上市要求。也就是说财政资金并没有像中行建行那样完全冲销坏账，而是保有部分对工行的权益。据专家分析，工行很可能将2016亿元可用财务资金分为两块，一块1240亿元资本金，作为财政出资；另一块776亿元，计作拨备；央行通过汇金公司动用150亿美元外汇储备，也折合人民币1240亿元注入工行，这样形成财政和汇金公司各持有工行50%的资本金，工行保有776亿元拨备的股本结构。而通过一系列财务重组，工行的不良贷款余额有望从去年底的7000多亿元降到1000多亿元，不良贷款比例从近20％下降到3%左右。
First, the ICBC is in more trouble than were the Construction Bank and the Bank of China. Becacuse ICBC historically took charge of financiang SOEs, it still has an official NPL ratio of around 20%, or roughly 700 billion RMB. At the same time, its CAR is still relatively low. Thus, the State Council has to clean up ICBC in a two-part process, both likely involving injection from China's foreign exchange reserve. The current injection is merely the first step in a two-step process of preparing ICBC for listing. First, banks find a way to increase capital adequacy ratio, which in the case of CCB and BOC was accomplished through good-old-fashion profit accumulation. Both ICBC and BOC had capital adequacy ratio above 6% in early 2004, with BOC having a CAR well above 8%. In the case of ICBC, the central government sped up the recapitalization process with a forex injection and with issuance of subordinated debt. The second step will be to reduce the store of NPLs. It is in this second step that CCB and BOC received the 45 billion injection. The two banks also got to off-load some 350b RMB in NPLs to the AMCs. I suspect ICBC will undergo a similar process. With China's foreign exchange reserve continuing its upward climb, ICBC will enjoy another forex injection and, for sure, ICBC will transfer a big slice of NPLs to AMCs, probably around a half of their current NPLs, or 350 billion RMB.
Thus, ICBC enjoyed a greater "free lunch" than did BOC and CCB. While BOC and CCB have had to work hard to build up profit every year in order to bulk up their capital, ICBC now receives substantial injections with hardly any improvement . I think this is the wrong move on the part of the central government. Instead of speeding up ICBC's IPOs-- although I believe that the injection into the BOC and CCB was justifiable-- why not set profitability targets for ICBC in the next few years and allow ICBC to slowly build up a capital base? By speeding up restructuring with what will be two foreign exchange injections, the central government merely encourages ICBC officials to rely on central bailouts instead of working harder to change corporate structure and culture. Also, the global capital market will not have a large enough appetite to buy shares from all three banks in the near future anyway. Through this accelerated restructuring process, those in charge of finance are looking to increase their "administrative accomplishments" before the 17th Party Congress. Once again, politics trumps sound economic logic in China.
国务院批准中国工商银行股改方案
央视国际 2005年04月22日 16:38
中国国有商业银行的股份制改革可以说是今年最受中外瞩目的经济大事之一。除中行建行能否成功上市外，工行农行的股改如何进行最为引人关注。昨天晚上，工行的股改终于破题，国务院宣告，工行股改方案已经获得批准。这里是工商银行总行，从外面看这里和往常一样平静，但随着股份制改造方案的正式启动，这家占中国银行业总资产近1/5的巨无霸，将全面进行股份制改造，并把国有商业银行的改革从试点阶段推进全面攻坚。由于工行的不良资产数额相对较大，比重相对较高，因此这次国务院采取了不同于中行建行的注资方案。中行建行是分别注资225亿美元外汇储备作为资本金，原资本金全部用于冲销坏账；而这次工行的方案是，注资150亿美元外汇储备用于补充部分资本金，使核心资本充足率从目前的4.77%左右达到6%，再通过发行次级债补充附属资本，把总的资本充足率从目前的5.52%左右变为超过8%，基本达到上市要求。也就是说财政资金并没有像中行建行那样完全冲销坏账，而是保有部分对工行的权益。据专家分析，工行很可能将2016亿元可用财务资金分为两块，一块1240亿元资本金，作为财政出资；另一块776亿元，计作拨备；央行通过汇金公司动用150亿美元外汇储备，也折合人民币1240亿元注入工行，这样形成财政和汇金公司各持有工行50%的资本金，工行保有776亿元拨备的股本结构。而通过一系列财务重组，工行的不良贷款余额有望从去年底的7000多亿元降到1000多亿元，不良贷款比例从近20％下降到3%左右。
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