March 29, 2017 / 9:25 AM / 6 months ago

China's AgBank in talks for more debt-to-equity deals

The logo of Agricultural Bank of China is pictured at its headquarters in Beijing, China March 28, 2017. REUTERS/Jason Lee

BEIJING (Reuters) - Agricultural Bank of China Ltd (AgBank) (601288.SS)(1288.HK), the country’s third-biggest listed lender by assets, is in discussions to undertake more than 20 debt-to-equity deals, after signing agreements with eight companies.

The eight deals were valued at about 70 billion yuan ($10 billion), AgBank President Zhao Huan said at a press conference on Wednesday.

The bank earlier said it had prepared for the establishment of a specialized institution for debt-to-equity swaps.

AgBank on Tuesday reported an 8.7 percent on-year profit growth for the fourth quarter ended December, boosted by higher fee and commission income.

But net interest margin dropped to 2.25 percent at end-December, compared with 2.31 percent at end-June, the eighth straight quarter in which margins have been squeezed.

The bank’s non-performing loan ratio (NPL), a key indicator for credit quality, eased to 2.37 percent at end-December, from 2.39 percent at end-September.

AgBank plans to settle 120 billion yuan in NPLs this year, said chief risk officer Li Zhicheng.

“Our ability to resolve NPLs is relatively strong,” Li said.

That will be handled through write-offs, transfer outs and debt-to-equity swaps.

AgBank write-offs and transfer outs amounted to 82.75 billion yuan in 2016, the bank’s annual filing showed.

Kang Yi, the bank’s vice president, said the lender was seeing a “turning point” on its loans business, with the pricing of loans rebounding.

Reporting By Shu Zhang and Matthew Miller; Editing by Himani Sarkar and David Evans

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