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Citic Executive Likely New Bank of China Chairman

Citic Executive Likely New Bank of China Chairman

A top executive at China's Citic Group conglomerate is expected to become chairman of Bank of China Ltd., 601988.SH -1.02% according to people with direct knowledge of appointments at the bank.

If appointed, Citic Vice Chairman Tian Guoli would take the top spot at one of China's largest state-run lenders at a challenging time. China's big banks face slowing profit growth and the potential for a rise in bad loans as the economy matures.

Mr. Tian, born in 1959, would succeed Xiao Gang, who recently was promoted to be the country's top securities regulator, as part of a broad reshuffle of government posts amid a one-in-a-decade leadership transition in Beijing.

Mr. Tian still faces a final vetting process, said the people familiar with the bank's appointments, and officials sometimes switch their picks at late stages. But Mr. Tian, who had worked at another of the big-four banks, China Construction Bank Corp., 601939.SH 0.00% is viewed as a suitable person to run Bank of China, according to the officials.

Bank of China is the smallest of China's top-four banks based on assets, the others being Industrial & Commercial Bank of China Ltd. 601398.SH -0.49% and Agricultural Bank of China Ltd. 601288.SH -0.74%

Prodded by Beijing, banks expanded lending dramatically during the global financial crisis as a way to keep the domestic economy humming. But now, as China's economic growth slows and the country strives to shift away from an investment-fueled development model, banks are coming under increasing pressure from declining lending margins and the prospects of bad debt.

Chinese leaders have pledged to allow market forces to play a bigger role in setting the country's interest rates, which would make it more competitive for Chinese lenders that have for years lived off a guaranteed spread between government-controlled lending and deposit rates.

Bank in China was the most aggressive among the big banks in terms of beefing up lending in 2009 and 2010.

Under Mr. Xiao's watch, Bank of China has transformed from a bank known within China mostly for its international business to one that has rapidly increased its domestic presence. Profit from its overseas operations declined to about 20% of total profit last year, from about 45% in 2006, according to data provider ChinaScope Financial.

But the bank still lags behind others, such ICBC, in terms of the number of domestic bank branches, which makes it harder for Bank of China to compete for deposits, the most important funding source for Chinese banks.

Net profit at Bank of China was 139.43 billion yuan ($22.5 billion) last year, up 12% from a year earlier, the slowest pace since the bank went public in 2006. Overdue loans, an indicator for future bad loans, totaled 74.90 billion yuan, up from 68.13 billion yuan in 2011.

Mr. Tian has been serving since 2010 as vice chairman and president of Citic, a big Chinese financial conglomerate with businesses ranging from banking and private equity to securities underwriting.

Net profit at Citic Bank Corp., 601998.SH -1.79% the country's seventh-largest lender by assets, slowed to a crawl last year, rising 0.7% to 31.03 billion yuan.

Before joining Citic, Mr. Tian had worked at Cinda Asset Management Corp., a state-owned debt-clearing firm set up in the late 1990s to take over bad loans from big Chinese banks. He had worked at China Construction Bank before that.

An appointment to Bank of China "is definitely a step up for him," one of the people said.

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