The Bank of Shanghai’s (601229 SH) first annual report since its mammoth IPO six months ago will please holders of the lender’s recently issued A-shares.
The Bank of Shanghai’s USD$1.6 billion IPO was the biggest listing on the Shanghai bourse last year, coming eight years after the lender first launched the process of seeking regulatory approval.
The listing coincided with ongoing efforts by many of China’s leading commercial banks to improve asset quality by raising funds via various channels.
According to its latest annual report Bank of Shanghai’s net profits increased by 10% in 2016, with net profits attributable to its parent company and shareholders posting a 10.04% year-on-year gain to reach 14.3 billion yuan.
Investments directed towards debt
Total assets saw a year-on-year increase of 21% to hit 1.76 trillion yuan (approx. USD$260 billion) led by growth in investment-class assets, with the group’s total investment amount rising by 55.19% to reach 916.1 billion yuan.
In the year of its A-share debut Bank of Shanghai’s played it safe by focusing on investment in bonds, with an increase in the ratio of financial assets available for sale and held-to-maturity investments, and a corresponding decrease in receivables investment.
The share of non-standard investment for Bank of Shanghai tumbled 20%.
Intermediary earnings rise as interest margins narrow
Earnings from the bank’s intermediation operations saw a swift increase, with net transaction fees posting a year-on-year gain of nearly 12%.
This gain help to compensate for a decline in net interest earnings, which fell from 26.682 billion yuan to 25.998 billion yuan on the back of narrowing spreads.
NPL’s and CAR
Bank of Shanghai managed to keep its non-performing loans at extremely modest levels in 2016, with the ratio dropping two basis points to close the year at 1.17%.
The special mentioned loan ratio did post an increase, however, rising 10 basis points to 2.16%
The bank’s capital adequacy ratio posted a solid improvement given that all the funds raised by the mammoth November IPO were directed towards shoring up core tier 1 capital.
CAR rose from 12.65% at the end of 2015 to 13.17% last year, while Bank of Shanghai now plans to further boost the metric with a private offering of preferred shares that is expected to raise 20 billion yuan.