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    Home»Banking»Lean credit provisions and cost efficiency amplified Bank of China 1Q20 earnings

    Lean credit provisions and cost efficiency amplified Bank of China 1Q20 earnings

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    Running two offices, one in Lusaka the capital and the other on the Copperbelt of Africa, Bank of China’s (BOC) lending model and cost efficiency, amplified its first quarter after tax earnings 24.1% higher to K59.5million compared with 1Q19 which was 23.2% higher than its fourth quarter profit after tax last year. Bank of China had the leanest cost to income ratio of 28% and was the second most profitable bank, in the first quarter, across the 18 bank industry.

    Minimal credit risks vs. economic growth contribution. Bank of China’s credit model points to extending credit to foreign entities that are mostly backed by the Peoples Republic of China explaining the thin credit impairment base of K537,000 for the size of the asset book of K1.86billion which widened 76% over a one year space. The cost efficiency bank has been cited for not lending at all which somewhat contradicts the essence of banking in light of the copper producing nations economic growth agenda.

    Fair share of industry contingent liabilities. Another outstanding feature about the bank is that it has the second largest contingent liability book of K4.4billion, 33.2% wider than a year ago yet 24% bigger than 4Q19 as it continued to offer advance guarantees to Chinese construction companies performing works in Zambia.

    Higher investment in securities. Total headline earnings ebbed higher 25.2% to K127.8million as investment in government risk rose 45.2% while advance income rose 67.9%. Non interest income softened by 8.7% as the bank bore the brunt of a 25.5% slide in fee and commission autopsy effects of Unwarranted Fee Directives cushioned by a tripling in foreign exchange trading come.

    The biggest dollar deposit book. Non interest expenses plummeted 69% to K2.5million year on year. Bank of China’s dollar deposits are second to none explaining why it’s business model supports placements through Nostros.

    Of all 18 commercial banks, Bank of China’s operating model on the face of it seems to the least prone to COVID shocks given it’s lean credit risk profile.

    Kwacha Arbitrageur

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