Profit at Shanghai Pudong Development Bank Co more than doubled in 2008, boosted by higher interest income and lower taxes, the bank said yesterday.

Earnings climbed to 12.5 billion yuan (US$1.8 billion), or 2.21 yuan a share, from 5.5 billion yuan, or an adjusted 0.97 yuan in 2007, the lender said in a preliminary earnings statement to the Shanghai Stock Exchange yesterday, citing unaudited figures. Its revenue jumped 33 percent to 34.4 billion yuan.

Despite earnings doubling over the year, the bank's fourth-quarter profit dropped from the third quarter, She Minhua, a China Securities Co analyst, said yesterday. The bank's fourth-quarter profit was 2.67 billion yuan, a 23.09 percent drop from the third quarter, She said.

"We think the main reason for the bank's lower profit in the fourth quarter is due to the margin spread tumbling and flat sales of wealth management products," he said.

Chinese banks enjoyed a record-high margin spread in the first half of last year as the People's Bank of China raised interest rates 10 times since 2002. However, a turnaround came as the central bank shifted its monetary policy from tight to moderately easing late last year to weather a global financial crisis and economic slowdown.

Against the backdrop, Pudong Bank's spread hit a record of 3.21 percent in the first quarter of last year. Its spread has been squeezed since the central bank cut interest rates five times from September, chopping a combined 216 basis points, or 2.16 percentage points, on its one-year benchmark lending rate.

Pudong Bank may also raise provisions against bad assets as risks grow amid an economic adjustment, which may curb growth in the bank's profit, She said, adding that he sees its profit at 12.62 billion yuan this year and rise to 13.32 billion yuan in 2010.

New York-based Citigroup owns a 3.78 percent stake of the Chinese lender.

(Shanghai Daily January 7, 2009)