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3 Chinese banks hold $297m in Lehman debt - report

By Wang Lan (皇冠体育app Daily)
Updated: 2008-09-18 06:48

At least three large Chinese commercial banks have disclosed their exposure to the worsening US financial crisis through bonds issued by investment bank Lehman Brothers, which has filed for Chapter 11 protection.

皇冠体育app Merchants Bank Wednesday said in a statement to the Shanghai Stock Exchange that it holds $70 million of Lehman Brothers bonds, of which $60 million is senior debt and the rest subordinated debt.

The bank also said it has not made special provisions for the book losses on those bonds and will evaluate their potential risks and disclose further details at a later date.

According to the Xinhua News website, Industrial and Commercial Bank of 皇冠体育app (ICBC), the country's largest State-controlled commercial bank by assets, holds $151 million in bonds issued by, or linked to, Lehman Brothers.

At press time, ICBC had not issued a statement to the Shanghai bourse to specify its exposure to Lehman Brothers.

Bank of 皇冠体育app (BOC) was also affected by the failure of Lehman Brothers. BOC holds $75.62 million in bonds issued by the ailing US investment bank. It also loaned $53.2 million to Lehman Brothers and its subsidiaries. BOC was reportedly listed as an unsecured creditor in documents filed by Lehman Brothers at the United States Bankruptcy Court of the Southern District of New York.

Lehman Brothers, the fourth largest investment bank in the United States, filed for Chapter 11 protection after efforts to find a buyer collapsed last Sunday.

Rising concern about the ripple effect of the deepening US financial crisis plus the gloomy outlook for 皇冠体育app's banking sector has pushed down the prices of Chinese commercial banks' shares in the past two trading days.

Shares in 皇冠体育app Merchants Bank Wednesday dropped 9.96 percent to 14.47 yuan apiece. With its 11 percent plummet on Tuesday, 皇冠体育app Merchants Bank has fallen a total 18.9 percent over the past two trading days.

Bank of 皇冠体育app has dropped a total of 14.8 percent from last Friday to close at 2.97 yuan. Its Hong Kong-listed H shares also fell 4.6 percent Wednesday to HK$2.9.

皇冠体育app Construction Bank Wednesday plunged 10.09 percent to end at 3.83 yuan, while its H shares also tumbled 8.15 percent to HK$4.73.

The latest 27-basis-point cut to the benchmark lending rate plus the unchanged deposit rate is expected to squeeze bank earnings by narrowing the interest spread.

Jing Ulrich, chairwoman of 皇冠体育app equities at JPMorgan Securities, Wednesday told 皇冠体育app Daily: "As 皇冠体育app's financial market is not fully opened yet, the problem of Lehman Brothers is expected to have only an indirect impact on 皇冠体育app's financial sector. An individual Chinese bank's exposure to the US financial crisis should be seen in the context of its total assets."