Bank of China (BOC), the mainland's second-largest lender, said
yesterday its 2006 net profit soared 65 percent, on strong
operating income and reduced taxes.
"The substantial improvement in net profit was attributable to
robust growth of operating income, improved operating efficiency,
effective management of credit costs and a decrease in the
effective tax rate," Xiao Gang, the bank's chairman, said
yesterday.
The bank notched up a net profit of 42.83 billion yuan last year
under international accounting standards, compared with 25.92
billion yuan a year ago. The net profit was higher than its initial
public offering forecast of 33 billion yuan for the full year.
Operating income rose 18.6 percent year-on-year to 148.38
billion yuan.
Patrick Yiu, associate director of CASH Asset Management, said:
"The result beats market expectations ... BOC withstood the
interest rate rise since non-interest revenue has been a growth
engine for the lender."
The bank's non-interest income grew 12.07 percent to 27.01
billion yuan, which, excluding losses from forex exposure,
accounted for 23.3 percent of its total operating income, up from
22.2 percent in 2005.
Net interest income rose 20.16 percent to 121.37 billion yuan
from a year earlier.
"One of the other reasons behind the good result is the pre-tax
deduction," said She Minhua, a banking analyst at CITIC China
Securities.
The bank paid an estimated 4.6 billion yuan less in taxes last
year due to a pre-tax deduction of total domestic staff salary
costs for 2006, approved by the tax authority.
Li Lihui, the bank's president, said he expected business growth
this year would be slower than in 2006, due to this one-off
measure.
But he was confident business would continue doing well in the
coming years.
"We will try to reduce our forex exposure in 2007," said Zhu
Min, executive vice-president of BOC.
He said the bank suffered a 9.8 billion yuan loss in its forex
investments as a result of the yuan's appreciation against the US
dollar. But the forex loss is somehow being cushioned by the fact
that returns on US dollar-denominated assets are higher than those
on yuan-denominated assets, he said.
The bank's A shares fell 1.32 percent to close at 5.24 yuan
yesterday. Its H shares rose 0.52 percent to HK$3.9.
(China Daily March 23, 2007)