By Engen Tham
SHANGHAI (Reuters) - Bank of China Ltd (BoC) (SS:601988) (HK:3988) posted its slowest fourth-quarter net profit growth in six years on Wednesday as losses on bad assets doubled and unpaid loans jumped against a backdrop of a slower economy.
China's fourth-largest lender reported net profit for the fourth quarter of 38.5 billion yuan (4.16 billion pounds), five percent higher than a year earlier and in line with analyst estimates, according to Thomson Reuters data.
Rising bad loans and lower profit growth show how China's most international bank is vulnerable to a slowing domestic economy, projected by the country's leaders to grow by about 7 percent this year, its slowest in quarter of a century.
BoC is the second of China's so-called big four lenders to report earnings. Agricultural Bank of China Ltd (SS:601288) (HK:1288) also reported a spike in bad loans on Tuesday and said its profit fell in the fourth quarter.
BoC said impairment losses on assets came in at 48.4 billion yuan at the end of 2014, up more than 100 percent from 23.5 billion yuan the year before. The bank's non-performing loan ratio also rose sharply to 1.18 percent from 1.07 percent in the third quarter, the biggest jump in more than three years.
The bank did not say which sectors suffered most. Its annual report said it: "reduced lending to industries characterised by high pollution, high energy consumption and overcapacity, and strictly controlled loans to real estate sector."
The Agricultural Bank of China Ltd (SS:601288) (HK:1288), also cited real estate as a problem sector in its annual report.
"I think there will be an increase in bad loans this year because the real estate sector really is no longer any good," said Jiahe Chen, chief strategist at Cinda Securities. "It's having a bigger and bigger impact."
While BoC is central to government plans to internationalize the yuan, it recently become the first yuan clearing bank in Sydney, it is still very much a domestic lender.
"Our strategy is not to seize business abroad, the main point is to serve domestic customers," said a senior loan officer at BoC, who was not authorised to speak to the media and declined to be identified.
BoC did not response to calls for comment.
BoC's shares in Hong Kong closed 0.2 percent lower ahead of the earnings release, compared with a 0.5 percent rise in the benchmark Hang Seng Index (HSI).
China Construction Bank Corp (SS:601939) (HK:0939) and Industrial and Commercial Bank of China Ltd (SS:601398) (HK:1398) are set to post annual earnings later in the week.