HONG KONG/BEIJING (Reuters) - Bank of China (3988.HK: Quote, Profile, Research) might post a 2007 loss because of a big write-down on billions of dollars of U.S. subprime-related investments, a newspaper reported on Monday, sending shares in the lender tumbling.
Quoting unidentified sources, the South China Morning Post said Chinese banking regulators had warned the country's leadership that Bank of China and two other state banks would make provisions for all their assets hit by U.S. mortgage defaults.
The report heightened growing concerns about China's exposure to the subprime crisis, which has hammered earnings of major European and Wall Street banks, prompting steep share falls and capital injections to shore up balance sheets.
Analysts, however, expressed doubts Bank of China (601988.SS: Quote, Profile, Research) would make full provisions for all its subprime-related assets in one go. The bank said its subprime-related assets were worth $7.95 billion at the end of September.
Samuel Chen, a banking analyst at JP Morgan, said write-downs would hurt fourth-quarter earnings but he still expected the bank, which earned more than $6 billion in the first nine months, to post a full-year profit.
"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," Chen said.
"If the bank writes off more than $1 billion, there is a possibility that it will generate a fourth-quarter loss."
The other two banks mentioned in Monday's report, Industrial Commercial Bank of China (1398.HK: Quote, Profile, Research)(601398.SS: Quote, Profile, Research) and China Construction Bank (0939.HK: Quote, Profile, Research) (601939.SS: Quote, Profile, Research) have said they held $1.23 billion and $1.06 billion respectively in subprime-related
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