Bank of China
Bank of China is one of the big four state-owned commercial banks of the People's Republic of China – the other three are Industrial and Commercial Bank of China, China Construction Bank and Agricultural Bank of China. Bank of China was founded in 1912 to replace the Government Bank of Imperial China, and is the oldest bank in China. From its establishment until 1942, it issued banknotes on behalf of the Government of the Republic of China along with the "Big Four" banks of the period: the Central Bank of China, Farmers Bank of China and Bank of Communications. Although it initially functioned as the Chinese central bank, in 1928 the Central Bank of China replaced it in that role. Subsequently, BOC became a purely commercial bank.
Report hints dividend cuts could go beyond Big Four banks
Report suggests other lenders might be allowed to trim payout ratios to meet capital rules
Investors should brace for lower dividend income from many mainland banks, as they conserve cash to shore up capital.
In February, state-owned investment arm, Central Huijin Investment, said the mainland's Big Four banks, in which it holds controlling stakes, would cut the banks' respective dividend payout ratios by five percentage points to 35 per cent of 2011 profits.
Bank of China, the nation's fourth-biggest bank, said in March that it would probably go farther and cut its dividend payout for this year to as low as 30 per cent, saying it would try to strike a balance between meeting regulatory requirements on capital and rewarding its shareholders.
But yesterday an article in state-owned China Securities Journal, citing unnamed official sources, indicated that other listed commercial banks on the mainland might be allowed to cut their dividend payout ratios.
Some analysts said the move could ease the pressure on commercial banks to raise fresh capital to meet the higher official requirements.
The mainland equivalent of Basel III capital requirements will take effect in January.
They require systemically important banks to meet a capital adequacy ratio of 11.5 per cent and 10.5 per cent for other banks.
Linus Yip Sheung-chi, a strategist with First Shanghai Securities, said investors would be positive about the dividend payout ratio cuts.
"Even if commercial banks cut the dividend payout ratio by five percentage points, the cash dividend that an individual investor could receive would not be reduced by a lot," Yip said.
"But the move will help improve banks' capital conditions and support the share prices."
In addition, the China Banking Regulatory Commission has set up a task force to look at innovative financing tools for commercial banks to boost their capital strength, China Business News reported yesterday, citing a source from a listed mainland bank.