China Everbright Bank Refutes Report Indicating Higher Exposure to Local Gov't Debt Risk

BEIJING, Jul. 25 -- China Everbright Bank on Saturday refuted a report by a unit of Goldman Sachs that implied that the bank has a higher level of exposure to risk default because of its high percentage of loans made to local government financing vehicles.

Gao Hua, a group that is part of Goldman Sachs's China operations, said in a research report that 20 percent of the China Everbright Bank's loans were made to local government financial vehicles.

The bank's loan-to-deposit ratio was 81 percent at the end of 2010, the report said.

The research data implied that the risk of bad local government debt has had a negative impact on the bank, but the results do not conform to reality, the bank said, adding that it is suspicious of the group's sources.

The bank hit back with data showing that by the end of the first quarter, the outstanding loans of local government financing vehicles totaled 94.9 billion yuan (14.7 billion U.S. dollars), down 22 billion yuan from the end of last year.

The percentage of loans made to local government financing vehicles fell to 11.5 percent by the end of March from 15 percent at the end of last year, the bank said.` The loan-to-deposit ratio was 71.15 percent at the end of last year, it added.

The bank's non-performing loan ratio for local government financing vehicles was 0.57 percent by the end of March, lower than the bank's overall ratio of 0.7 percent, it said.

The bank has strictly controlled new lending from local government financing vehicles and barred loans to borrowing institutions that are below the provincial level, it said.

The bank's asset quality is generally good and its risks are controllable, it said.