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August 22, 2009

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CCB beats views with rise in Q2 earnings

CHINA Construction Bank, the country's second-largest lender by assets, beat forecasts with an 11.7 percent jump in second-quarter profit, as loans soared under the country's economic stimulus plan.

The lender, in which Bank of America has about an 11 percent stake, yesterday said there was also an encouraging development in net interest margins, the major source of profits for Chinese banks.

"With the gradual economic recovery, the bottoming out of market rates and the shrinking time lag between repricing of deposits and lending, decrease in net interest margin had slowed down notably," the bank said.

The lender earned 29.6 billion yuan (US$4.33 billion) in the three months through June, up from 26.5 billion yuan a year earlier and beating analysts' average forecast of 27.6 billion yuan in a Reuters poll.

CCB's total outstanding loans and advances surged almost 20 percent from December to 4.4 trillion yuan, offsetting a decline in net interest margin, which narrowed to 2.46 percent at the end of June from 3.29 percent a year earlier.

"In the first half, most lending went to infrastructure projects, (in) which China Construction Bank is traditionally very competitive," Joe Lu, an analyst at BOCOM International.

Chinese bank lending jumped in response to the country's 4 trillion yuan economic stimulus program, but their interest margins were squeezed by looser monetary policies.

CCB's net interest income fell 7 percent to 102.5 billion yuan in the first half.

The bank's non-performing loan ratio edged down to 1.71 percent, from 2.21 percent at the end of December.


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