U.S. Credit Woes Spill Into China

Bank of China Ltd. released earnings for the second quarter which drastically underperformed its competitors due to exposure to subprime mortgages and other U.S. housing loans.  The third largest bank in China reported that it held $10.5 billion worth of securities backed by U.S. home loans.  Roughly 35% of those $10.5 billion worth of securities, or $3.64 billion, are tied to subprime U.S. mortgages. 

So far during the span of the global credit crunch, Bank of China has written down a total of $522 million of losses on Alt-A loans, and an additional $599 million of losses tied to other mortgage investments.  During the second quarter, the bank reported that it wrote down current subprime investments by $405 million.  Investments in U.S. subprime mortgages have led to a total of $3 billion in losses for Bank of China during the past year. 

The credit markets in China have fared quite well so far compared to the U.S. and Europe.  According to data compiled by Bloomberg, the China financial sector has experienced $23 billion of losses so far, compared to $230 billion of losses in Europe, and $254 billion in the U.S.

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Comments

[bbzz24:]

it is fair to count UBS' losses to the US as thier IB is US based and all thier exposure was built by the 'star' banker Costas who blew up the DRCM.

2008 Aug 29 03:11 AM

[johnthebear:]

Thanks for your info.

Have you heard much about non-performing commercial and industrial real estate loans in China?

What do you expect to happen to the China economy over the next 6 months?

2008 Aug 29 09:21 AM