ICBC Leasing eyes capital increase by year-end

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Although rumours are in the market that ICBC Leasing is planning to increase its capital, the leasing arm of Industrial and Commercial Bank of China (ICBC) says it has enough capacity at the moment.

ICBC Financial Leasing Co., Ltd. a wholly owned subsidiary of ICBC, was established in September 2007 with a Yuan 2 billion ($271 million) initial capital. It was created to tap into the shipping, aircraft and large scale equipment markets and provide domestic and foreign customers with leasing, rent transfer and securitization and capital management. The company is the first innovation finance leasing company approved by China Banking Regulatory Commission.

"We have a requirement to maintain an asset equity ratio of 8% meaning we can covers up to 12 times our registered equity," explains ICBC Leasing Managing Director, Global Head - Aviation Finance Johnny Lau.

"If we close as much business as last year, we will need additional equity, but for the moment we are fine," he adds.

ICBC Leasing closed transactions covering 14 aircraft last year and has just added six A320 aircraft to its portfolio.

CAO understands that a capital increase has been studied to finance new deliveries but at this stage has not been approved.

"If it happens it will be in the course of this year," he comments.

Last month ICBC reported a Yuan 111.2 billion profit after tax for the year ended 31 December 2008, up 35.2% from the year 2007. The bank said it strengthened its position as the world's largest bank by market value last year and became the most profitable bank in the world. In 2008, ICBC's return on average total assets reached 1.21%, up 19 basis points from 2007. Return on weighted average equity was 19.43%, up 320 basis points from 2007. Net interest margin reached 2.95%, up 15 basis points from 2007.

ICBC Leasing is currently working on additional transactions that could be finalised over the next month, CAO understands.