The mortgaged property assets scattered in a dozen provinces and municipalities were divided into three tranches by geographical location -- northern, central and southern, with two of them sold to a consortium led by Morgan Stanley and one to a Deutsche Bank led group.

CCB received tenders from eight of the 15 potential bidders including one domestic conglomerate, while each tranche had received at least three bids with the top few bids very competitive, said a spokesman for the bank.

Ernst & Young, the deal's financial advisor, said this transaction represents: 1st commercial bank in China to dispose ofnon-performing assets using an international bulk-sale auction format, 1st portfolio sale of settled assets in China, 1st outright sale of a 100 percent interest in distressed assets in China and highest recovery value of any distressed asset auction in China.

The roughly 35 percent recovery rate indicated a sign that investors were becoming more enthusiastic and ambitious towards assets of Chinese banks, according to industrial sources.

"We are proud to have participated in this pioneering transaction that builds on Morgan Stanley's long-term relationshipwith CCB and helps China's commercial banks resolve their non-performing assets," said Sonny Kalsi, a managing director of Morgan Stanley Asia.

"We see the potential in these assets and hope that this successful transaction will help stimulate the distressed asset market in China."

China is in the midst of overhauling its banks -- laden with piles of bad loans due to excessive lending to disfunct state-owned enterprises in the past decades -- to prepare them for unrestricted competition from foreign rivals by 2006 under WTO commitments.

And CCB, one of the country's Big Four banks, has been eager totidy up its books and write off bad debts in a bid to meet its listing target at the end of 2004 or early next year.

However, it said net profit plunged 89.6 percent as more provisions had to be set aside for writing off non-performing loans.

The bank's non-performing loan ratio, by the international standard, was 8.77 percent in late March, a drop of 0.35 percentage point compared with the beginning of the year.