China CITIC Bank, the country's seventh-largest lender, said on September 25 it plans to cut its exposure to overseas assets and tighten risk controls in response to global credit woes. The financial crisis will impact the bank's profits in both 2008 and 2009, Chief Executive Officer Chen Xiaoxian told Reuters on the sidelines of a banking conference.
"Nobody can tell how long the US financial crisis will last and how big impact it will have on global markets, so it is necessary for us to decisively cut holdings of relevant assets," said Chen.
"The crisis will certainly have a negative impact on our bank's foreign currency assets. If the crisis continues, you will see it will have an even more negative impact on the whole banking industry in China." Chen, who declined to specify the composition of CITIC Bank's overseas assets, said the lender also plans to strengthen risk controls and monitor liquidity more closely.
The banking flagship of China's top financial conglomerate CITIC Group, it has expanded rapidly over the past few years in private banking and wealth management, winning a reputation for innovative derivatives-based products. That strategic shift came in response to macroeconomic controls aimed at cooling banks' loan growth.
Chen said the Beijing-based bank's future wealth management strategy, targeting China's rapidly expanding pool of millionaires, will be designed primarily with "product safety" in mind. In August, CITIC Bank, which is part-owned by Spain's Banco Bilbao Vizcaya Argentaria, posted a 162 percent jump in the first half profit, driven by a surge in fee-based income and lower taxes.
CITIC Bank reported last week it had $76 million of exposure to Lehman Brothers, but no holdings of subordinated bonds issued by the collapsed US investment bank. "We must take lessons from the crisis and be fully aware of investment risks," Chen said.
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