Bank of China books $1.3 bln subprime allowance

Bank of China <3988.hk>, the country's flagship foreign exchange lender, posted a 31 percent rise in 2007 profit amid a booming mainland economy, but it booked a $1.3 billion allowance to cover potential losses on its U.S. subprime-related securities.

The state-run lender said it held about US$4.99 billion worth of subprime-related asset-backed securities (ABS) at the end of 2007.

The Beijing-based bank <601988.ss>, in which Royal Bank of Scotland is a large shareholder, posted 2007 net profit of 56.25 billion yuan ($7.98 billion), compared with 42.83 billion yuan in 2006.

On average, 26 analysts were expecting a net profit of 53.46 billion yuan for last year, with an 8 billion yuan profit seen for the fourth quarter, according to Reuters Estimates.

Bank of China's Hong Kong-listed shares had lost 20 percent so far this year through last week, compared with a 24 percent drop in the benchmark Hang Seng Index <.HSI>, amid a rout in global equities sparked by fears of a U.S. recession and growing troubles in credit markets.

The shares rose 7.28 percent on Tuesday before the results report, compared with a 6.43 percent gain in the broader index.

(US$1=HK$7.8=7.0535 yuan)