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Shanghai banks remain optimistic

MORE than 70 percent of the banks in Shanghai do not expect profits to drop this year despite a sharp growth slowdown last year, the local banking regulator said yesterday.

About 30 percent of the banks surveyed said they expected profit to grow this year while another 40 percent said they forecast flat profits, leaving just 20 percent projecting a drop in profits, said the Shanghai Bureau of the China Banking Regulatory Commission yesterday.

Banks are facing a squeeze on interest rates and potentially worsening assets.

The People's Bank of China, the central bank, has cut interest rates five times since September, eating into the banks' spreads.

More than 60 percent of banks said interest rates risk is a major concern.

About 80 percent of Chinese banks still expect their spreads to be the biggest profit contributors and 70 percent of overseas banks share that view.

Profit growth for banks in Shanghai slowed last year amid the economic downturn. The lenders raked up a record high combined profit of 70.86 billion yuan (US$10.4 billion). But growth slowed to 28.2 percent from 2007's 75 percent.

With government measures to bolster the property market, banks are also gaining confidence in the real estate market. About 70 percent of the banks said they found the sector stable rather than the previous "bearish" forecast.


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