Huaxia Bank Co, a Chinese lender that is in talks to sell a stake to Deutsche Bank AG and six other overseas banks, posted a second-quarter profit increase of 44 percent as it made more money from loans and investments.

Net income at China's fourth-biggest publicly traded lender rose to 328 million yuan (US$40 million), from 228 million yuan (US$28.15 million) a year earlier. Revenue rose to 3.4 billion yuan (US$419.75 million) from 2.7 billion yuan (US$333.33 million). The figures were derived by subtracting first-quarter earnings from first-half results released on Monday by the Beijing-based bank to the Shanghai stock exchange.

The nation's four biggest banks made 510.3 billion yuan (US$63 billion) of new loans in the first half, 24 percent less than the same period a year earlier. By comparison, the nation's 12 shareholding commercial banks, including China Merchants Bank and Huaxia, made 319.4 billion yuan (US$39.43 billion) of new loans, 52.9 billion yuan (US$6.53 billion) more than a year earlier, according to the People's Bank of China.

"Shareholding banks are eating away some market share of the State-owned rivals," said Wu Yonggang, a banking analyst at Guotai Junan Securities Co in Shanghai.

Huaxia is in talks with Deutsche Bank and six other overseas lenders to sell a stake of as much as 25 percent to boost capital and improve management.

Potential buyers include Singapore's DBS Bank Holdings Ltd, Societe Generale SA and BNP Paribas SA of France, and Japan's Sumitomo Mitsui Financial Group Inc.

Shares of Huaxia have fallen 6.3 percent this year, compared with a 9.4 percent decline on the benchmark Shanghai Composite Index.

China started to impose limits on real estate projects in April 2004 and later extended the curbs to industries such as cement and steel to cool the world's seventh largest economy, which grew at an average annual pace of 8.6 percent in the past decade.

China Merchants Bank, the nation's largest publicly traded lender, said last week first-half profit gained 26 percent.

Net income at Huaxia Bank rose 29 percent to 640 million yuan (US$79 million) or 0.15 yuan a share, from 495 million yuan (US$61.1 million) or 0.12 yuan a share a year earlier.

Huaxia aims to find an investor by the end of September, and the negotiations with Deutsche Bank are more advanced than Huaxia's talks with other interested investors, Boersen-Zeitung newspaper reported last month.

Deutsche Bank will buy about a 5 percent stake in Huaxia for US$110 million with the purchase to be concluded next month, the Standard newspaper said yesterday.

(China Daily August 24, 2005)