China Citic Bank Has $1.18 Billion of Fannie Mae, Freddie Mac Debt

August 21 2008 - China Citic Bank Corp., the banking unit of the nation’s largest investment company, said it held $1.18 billion of home mortgages secured by Fannie Mae and Freddie Mac, making up all of its holdings backed by real-estate loans.

Citic Bank held a total of $1.25 billion of mortgage-backed securities, of which 98 percent are rated AAA. At the end of June, the company had set aside 15 million yuan ($2.2 million) of provisions for the overseas bonds rated Alt-A and collateralized debt obligations, it said.

Citic Bank also owned an additional $403 million of institutional debt issued by the two U.S. home-mortgage companies as of June 30, the Beijing-based firm said in a statement to the Hong Kong exchange yesterday.

The U.S. government-sponsored companies tumbled yesterday in New York trading to the lowest level since at least 1990. Rising borrowing costs and evidence that demand for their debt was waning last month prompted Treasury Secretary Henry Paulson to seek authority to pump unlimited amounts of capital into Fannie and Freddie in an emergency.

Cao Guoqiang, Citic Bank’s assistant president, said today the company will pare investment in Fannie and Freddie securities “as appropriate”.

The investment in mortgage-backed debt by Fannie and Freddie makes up 3.25 percent of Citic Bank’s total debt holdings.

Citic Bank Has $1.18 Billion of Fannie, Freddie Debt
by Luo Jun and Chia-Peck Wong | Bloomberg