Subprime Holdings Damp China Bank Profits

Chinese banks reported increased profits in 2007, but they’ve suffered in recent months as a result of the U.S.’s subprime-mortgage crisis. From Reuters Via Financial Times :

Industrial & Commercial Bank of China and Bank of China posted higher fourth-quarter profits on Tuesday, buoyed by the country’s surging economy, but the state giants were dragged down by holdings in US subprime-related securities.

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. Bank of China, the country’s flagship foreign exchange lender, said it held about $5bn worth of subprime-related asset-backed securities at the end of 2007, and booked a $1.3bn provision to cover potential losses on its US subprime-related securities.