Bank of China, the Asian partner of Royal Bank of Scotland, yesterday posted an 85% leap in net profit during the first quarter on higher interest income and bigger revenue from fees and commissions.
Bank of China, the Asian partner of Royal Bank of Scotland, yesterday posted an 85% leap in net profit during the first quarter on higher interest income and bigger revenue from fees and commissions.
Positive results from China's second-largest lender by market value also boosted Royal Bank shares, which yesterday climbed 1.4%, or 5.5p, to 354.5p.
Bank of China said its net profit rose to 21.7bn renminbi (£1.5bn) for the year to the end of March, compared with RMB11.7bn a year earlier.
The bank's share price has lagged that of its peers after it reported last August that it held almost $9.7bn worth of bonds backed by US sub-prime loans, the largest amount of any Asian company.
However, Bank of China yesterday said its exposure to the US sub-prime mortgage market fell to $4.4bn at the end of the first quarter after it dropped to $4.9bn at the end of last year.
The company's shares have climbed by a third since a 2008 low on March 18, but are still up only 2.4% so far this year.
By comparison, shares of rival Industrial and Commercial Bank of China are up about 10% this year, while the benchmark Hang Seng index is down 8%.
Bank of China's first-quarter net interest income rose 18.7% to RMB40.8bn. Net fee and commission rose RMB82.9bn to RMB9.5bn.
Edinburgh-based Royal Bank withstood opposition from its own investors when it first emerged that it was planning to invest in Bank of China.
Royal Bank originally paid around £1.6bn of its own cash for a holding in Bank of China of just more than 5% - but it has since reduced that stake to 4.26%.
Meanwhile, Bank of China also said it paid RMB7bn in taxes during the quarter, a 39.2% drop as a result of the new enterprise income tax law, which cut tax rates for firms in China.
Separately, Bank of China's Hong Kong unit said net interest income declined in the quarter because of a slowdown in initial public offerings.
Chinese banks are currently working to diversify their revenue streams away from their historical dependence on lending to state-owned companies.
On a price-to-earnings basis, Bank of China trades at 12.3 times 2008 earnings, while ICBC trades at 16.8 times.
After a bumper 2007, Chinese banks are expected to face a tougher market in 2008 as Beijing imposes curbs on lending and takes other steps aimed at heading off resurgent inflation.
Slower loan growth means borrowers in key sectors, such as real estate, risk defaulting as the weakening global economy takes its toll, which could increase non-performing loans in 2008, analysts have said.
l Royal Bank is understood to be set to cut 7000 jobs as it pushes ahead with the integration of ABN Amro's investment bank and slashes the headcount in divisions hit by the credit crunch, according to reports yesterday.
"Since the acquisition of ABN Amro we have consistently said that as we brought our two wholesale banking businesses together there would be job losses over the course of the next two years. This is unfortunate but inevitable," a Royal Bank spokeswoman said.
Royal Bank declined to comment on the precise numbers, although the spokeswoman signalled that most of the cuts were expected to be in the US, London and continental Europe.
One report yesterday claimed the bank was expected to start writing to staff just below senior management level as early as tomorrow as part of a consultation process likely to take four to six weeks.
