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August 20, 2009

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Home » Business » Finance

BoCom profit flat in first half

THE Bank of Communications yesterday posted a flat profit in the first half of this year due to a drop in interest income that came despite rapid credit growth.

The Shanghai-based bank, in which HSBC Holdings holds a 19 percent stake, earned a better-than-expected 15.56 billion yuan (US$2.28 billion) in the first six months of 2009, up 0.3 percent from a year ago, the bank said yesterday.

In the second quarter, BoCom posted net profit of 7.6 billion yuan, on par with the previous quarter, according to a filing to the Hong Kong Stock Exchange.

Its rising fee-based income helped counter decreasing interest income as interest margins fell. Interest margins are a key measure of lending profitability.

The bank's fee-based income jumped 17.7 percent on year to 5.48 billion yuan in the first half, while its net interest income fell 9.7 percent on year to 29.79 billion yuan in the same period.

Its net interest margin contracted to 2.21 percent in the first half after the central bank cut interest rates five times in the second half of last year. The indicator sat at 3.02 percent last year.

"Net interest income recovered in the second quarter after falling for two quarters," said Li Jun, president of the bank. "We expect net interest income to strengthen further." The bank's net interest income increased 4.23 percent on year in the second quarter to 15.2 billion yuan, ending two straight quarterly drops.

"The bank's rapid credit growth is likely to slow down to a more rational level in the second half of this year," said Hu Huaibang, chairman of the country's fifth-biggest bank.

Outstanding loans at BoCom rose 31 percent on year to 1.7 trillion yuan at the end of June from the beginning of the year. The bank's bad loans accounted for 1.51 percent of total advances as of June 30, compared with 1.92 percent at the end of last year.

Chinese banks extended 7.37 trillion yuan of new loans in the first half of this year. The industry expects loan growth to slow in the second half.


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