Interim results posted by the Industrial and Commercial Bank of China (ICBC) yesterday showed it had become the world's most profitable bank, with net profits for the first six months of 2008 amounting to 64.879 billion yuan (US$9.42 billion), up nearly 57 percent from the same period last year.

ICBC (SSE: 601398; SEHK: 1398) attributed its strong performance to rapid growth in its fee and commission income, up 48.03 percent to 24.48 billion yuan. The bank also called attention to its increasing involvement in the domestic wealth management market. In the first half of 2008, ICBC said its sales of wealth management products were up 123 percent over the same period in 2007. The wealth management business is rapidly expanding in China as increasing numbers of fortunes are made from the country's booming economy.

The bank's concentration on the Chinese domestic market has means it has relatively minor exposure to the US sub-prime crisis. ICBC wrote off US$702 million on sub-prime related investments in the first half of 2008. This contrasts with total write-downs of sub-prime assets of US$55 billion by Citigroup and US $44 billion by UBS since the crisis began.

In another milestone ICBC is now the world's largest bank in terms of market capitalization. Chinese banks now occupy 3 of the top 5 spots, with ICBC being joined by China Construction Bank and Bank of China.

It is all a far cry from the not-so-distant past when China's largely state-owned banking sector was regularly lectured by Western financial commentators on its non-performing loans to state owned corporations. It seems that, for now at least, non-performing assets have gone west.

(China.org.cn by John Sexton August 22, 2008)