SDB reduces bad loans

The Shenzhen Development Bank (SDB) has won applause from stock analysts and is endearing itself to investors after starting on a clean slate and writing off its entire non-performing and questionable loans.

The mid-sized bank said it had written off 9.4 billion yuan of bad loans and provisioned 5.6 billion yuan to cover further borrower defaults. These charges trimmed the bank's profit for 2008 to 600 million yuan, down 77 percent from 2007.

The move improved the bank's asset quality substantially and helped regain market confidence. Despite the fall in earnings, "investors are still buying SDB shares as they do not have to contend with nasty surprises in future," said Feng Wei, analyst, Guohai Securities.