Bank of Communications (BoCom), the mainland's fifth-largest lender, said yesterday its net profit for the first half amounted to 6 billion yuan (US$750 million), up by 31 percent year-on-year, driven by the strong growth of loans.

 

But analysts expect the boom will slow down in the second half following the central government's implementation of tightening policies to curb the overheated economy.

 

BoCom, which kicked off the earnings season for mainland banks listed in Hong Kong, said its net interest income jumped over 23 percent versus the same period last year to 18 billion yuan (US$2.25 billion), boosted by strong lending demand, while net commission and fee income reached 1.3 billion yuan (US$162.5 million), representing an increase of nearly half a percentage point.

 

Bank analysts earlier had expected BoCom, which reported a 42.7 percent increase in first-quarter earnings, to maintain a strong growth for the first six months this year, benefiting from loan growth and rising fee income, as well as newly launched financial products.

 

BoCom, which is 19.9 percent-owned by the world's third-largest bank HSBC Holdings, said its loans to customers grew by 16.9 percent in the first six months ended in June, and predicted it would achieve whole-year growth of 15 to 18 percent, despite the central government's tightened loans policy.

 

The mainland's banking authorities raised the interest rate on Friday for the second time in four months. It will come as a big cool-down for the balance sheets of mainland banks.

 

"Given the tightened borrowing policy blended with fierce market competition, BoCom might see its loan business slide down to single-digit growth in the second half of 2006, as the central government's macroeconomic control measures would take effect by then," an anonymous bank analyst told China Daily.

 

But BoCom said it would "adjust credit policies in accordance with changes" and is confident the country's economy will keep the bank's loan growth at a robust level.

 

"We believe the country's economy will keep growing quickly, customers' loan demand will be maintained, and our loan growth for the whole year would be around 15 to 18 percent," said Peng Chun, executive director and vice-president of BoCom, at a press conference in Hong Kong yesterday.

 

BoCom has made big efforts to broaden its non-interest income, promoting its dual-currency credit cards and wealth management products to high-end clients.

 

The Shanghai-based lender said in a statement that it has issued over 1 million credit cards through its partnership with HSBC, and the average card consumption, active cards ratio and interest-bearing principal ratio were maintained at a good level, indicating that cards were of relatively high quality.

 

(China Daily August 23, 2006)