* Q2 profit growth slows to 5.6 pct from 13 pct in 2013
* SMEs, steel industry, exporters in eastern areas all
* BoCom to seek new private-sector investors
(Recasts, adds NPL details, new investment, share performance)
By Lawrence White and Engen Tham
HONG KONG/SHANGHAI, Aug 21 China's Bank of
Communications Co Ltd (BoCom) said on
Thursday it expects bad loans to rise this year as businesses in
major manufacturing regions suffer in a slowing economy, the
second big lender to make such a forecast this week.
BoCom, China's fifth largest lender, reported slowing profit
growth and rising non-performing loans in the second quarter,
joining Bank of China, the country's fourth largest, which on
Tuesday posted similar results and also forecast an increase in
BoCom's Chief Risk Officer Yang Dongping told reporters the
highest concentration of non-performing loans were in the
eastern regions of Jiangsu and Zhejiang, home to some of China's
biggest export-focused, manufacturing hubs.
Yang also said the bank expected to see a slight rise in
non-performing loans over the next year, adding that the overall
risk was "manageable". China's economic growth is expected to
slow to 7.5 percent in 2014 from 7.7 percent a year ago.
Zhejiang and Jiangsu are located in the Yangtze River Delta,
an area which in 2012 accounted for half of China's exports but
which has recently seen an increase in credit risk due to the
Like Bank of China, BoCom said steel and wholesale
industries in the eastern regions were among those hardest hit.
"The bank's asset quality was affected by the spreading of
risks from steel trade businesses and privately-owned SMEs,
mainly located in Jiangsu and Zhejiang regions," BoCom said in
its earnings statement. SMEs are small and medium enterprises.
BoCom said its ratio of bad loans rose to 1.13 percent in
the second quarter from 1.09 percent at the end of March.
Its net profit rose 5.6 percent to 18.08 billion yuan in the
quarter, according to a Reuters calculation from company
figures, but the increase was much slower than the 13 percent
second-quarter profit growth the bank reported in 2013.
Most Chinese state-banks are trying to decrease the
proportion of non-performing loans, which have spiked as
economic growth slows. China's bad loan levels rose to 1.08
percent at the end of June, according to official data, the
highest ratio since 2011.
The lenders are also poised to raise a record $120 billion
in funds over the next two years to shore up their balance
sheets in the face of rising bad debts and to comply with
stricter global capital requirements known as the Basel III
BoCom's capital adequacy rose to 12.75 percent, compared to
12.19 percent at end-March, partly from a change in the way it
calculates that ratio.
BoCom is a joint-stock bank whose biggest shareholder is the
Ministry of Finance with 27 percent, followed by HSBC Holdings
PLC with 19 percent.
Reuters reported last month that BoCom is studying
feasibility plans for so-called hybrid ownership, becoming the
first state-controlled bank to pilot a scheme aimed at letting
private capital play a bigger role in the economy.
($1 = 6.1510 Chinese yuan)
(Additional reporting by David Lin in SHANGHAI; Editing by