Bank of China has $1.3 billion subprime allowance

26 March 2008

Bank of China has announced that it has booked a US$1.3 billion (£0.65 billion) impairment allowance in order to cover any potential losses attached to its US subprime related securities.

The bank is the leading foreign exchange lender in China and has reported a 31 per cent increase in profit for 2007, to 56.25 billion yuan (£4 billion), as the Chinese economy continues to boom.

However, Reuters reports that Beijing-based Bank of China held US$4.99 billion (£2.5 billion) worth of asset-backed securities related to the subprime market at the end of last year.

Industrial & Commercial Bank of China (ICBC) has reported a 63 per cent increase in earnings for the fourth quarter, exceeding analysts' expectations.

ICBC is the largest bank in the world by market value and has announced that it held US$1.23 billion at the end of 2007, booking US$400 million as an allowance for possible losses in the subprime market.

The credit crunch in the US subprime lending market has affected economic conditions and banks around the world, including UK bank Northern Rock, which experienced the first run on a British bank in more than a century last year.

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