Bank of China impairs $33m loan in annual report, likely linked to CBL
Bank of China New Zealand's unit included a $12 million provision for impairment losses linked to one loan in its latest disclosure statement for the year to Dec. 31 after reports it lent 19.5 million euros to CBL Corp, currently in voluntary administration.
A spokesperson for Bank of China New Zealand said the bank declined to comment.
However, in the disclosure statement it said "as at 31 December 2017, NZ Banking Group has identified a loan with a carrying value of 19.5 million euros (NZ$33.02 million), gross of provisions for impairment losses, to be impaired. The loan is impaired on the basis of objective evidence indicating the recoverable amount of the loan is less than the carrying value."
The bank's explanation that "recoverability" of the loan "is complex in nature and limited in availability." Industry observers say it had exposure to CBL.
"That's because of a specific exposure that is in the public domain. They have one loan that is proving problematic," said John Kensington, head of banking and finance for KPMG in New Zealand. According to Kensington, the bank is one of the three lenders to CBL Corporation and "they have made a level of provision they believe is appropriate for that." The prior year included a $501,000 provision. The provision was more than half of its net operating income of $21.6 million in the period.
The provision for impairment loss on the loan reflects management's best estimate of loss incurred and it underscored "there is a high degree of judgment and uncertainty in the provision and the loss ultimately suffered by the bank may be significantly greater or less than the amount provided."
Auckland-based CBL appointed KordaMentha voluntary administrators on March 2 after the Reserve Bank sought an interim liquidation of its New Zealand supervised arm and the Central Bank of Ireland made a similar move against the insurer's European division.
CBL's half-year report dated Aug 30 shows it had bank debt with ANZ Bank and the remaining $50 million and 50 million euros would both mature on November 30. According to NBR, that debt was refinanced and extended to about $170 million to $180 million through a consortium of banks led by ANZ and including ICBC and BOC.
ICBC did not immediately respond to a request for a comment and an ANZ Bank spokesperson said "we don't comment on customer matters." KordaMentha was also not immediately available.