Bank of China’s Australian retail arm defied the industry-wide profit slide last year as it continued to build a presence in the local mortgage market.
The bank posted a net profit of A$24.6 million in the 12 months to the end of December – up 9 per cent on the 2019 result.
Most other foreign banks with retail subsidiaries in Australia such as ING and HSBC suffered profit declines of up to 30 per cent last year after COVID support measures and rate cuts crunched revenue lines.
BOC’s local directors attributed the earnings improvement to higher net interest income, which was supported by a 37 per cent expansion of the loan book and a 10 per cent decline in interest expenses.
In notes to the 2020 accounts BoC Australia said that it had extended loan repayment relief to borrowers but it did not disclose the value of loans exposed to support measures.
The $1 billion expansion of the loan book to $3.7 billion was mostly funded through new deposit flows that exceeded $650 million.
The bank also secured additional funding through the Reserve Bank’s Term Funding Facility.By the end of December BoC Australia had fully drawn its TFF entitlement of $77.6 million.
In the last year BoC Australia has signalled its intention to deepen its involvement in home lending by widening its footprint in third party distribution.
BoC’s home loans are marketed by brokers affiliated with the nation’s largest mortgage aggregation platforms including AFG, Loan Market and Connective.
While BoC has expanded its local business exclusively through organic growth, it is viewed as a possible acquirer of Citibank’s local retail banking unit.
Acquiring the Citi business would be transformational for BoC because it would quadruple its Australian loan base.
The accounts of BoC Australia do not include the financial performance of the corporate banking activities of Bank of China’s Sydney Branch operation.
According to official APRA data, the branch expanded its lending to corporate borrowers by about $600 million to $18.2 billion in 2020.
Growth in the branch’s deposit book was more robust, rising $2.8 billion to $10.7 billion.While the BoC Australia and the branch operate as discrete entities, directors of the retail business are actively involved in the branch’s operations.
The 2020 accounts reveal that the branch paid BoC Australia chair Professor Stephen Martin and other members of his board $350,199 for services they provided during the year.
Banking Day revealed earlier this week that the BoC branch is one of the most active lenders to the Australian coal industry.
The bank has not responded to a request to speak with Professor Martin.