The Industrial and Commercial Bank of China, the country's largest lender, on Thursday posted a net profit of 33.7 billion yuan (4.2 billion U.S. dollars) for last year, a year-on-year increase of 12 percent.

The bank's 2005 annual report shows that the aggregate profits reached 78.1 billion yuan, but net profits were dramatically eroded as the vast majority of earnings in the first six months were set aside for loan losses.

The bank, which is planning to float on the Hong Kong stock market later this year, was expected to have a "more stunning" performance in 2006, Xie Taifeng, the head of the bank's information office said.

Outstanding non-performing loans amounted to 154.4 billion yuan at the end of last year, or 4.69 percent of total lending, a sharp drop from the previous year's 16.47 percent.

And its non-performing asset ratio was estimated at roughly 2.5 percent, given that the bank's outstanding loans accounted for less than half of its total assets, Xie revealed.

Its capital adequacy ratio (CAR), a measure of its own capital in proportion to its assets, hit 9.89 percent and its core CAR reached 8.11 percent at the end of 2005.

Xie said the current CAR should be higher, citing the bank's strategic investors agreements with the ICBC last year, but the ICBC received its funds earlier this year.

A foreign trio of Goldman Sachs, American Express and Allianz Group has already paid a combined 3.78 billion U.S. dollars for a 8.89 percent stake in ICBC, the highest-ever foreign investment in China's banking industry.

The government hopes its "big four" state banks -- the ICBC, the Bank of China, China Construction Bank and the Agricultural Bank of China -- once plagued by a mountain of bad debts, will strengthen corporate governance and streamline operations with the help of foreign investors and public listing.

"It is an upbeat annual report, which shows that the new management structure and operation process introduced by the bank during its restructuring efforts worked," said Zhang Xi, a banking analyst with China Galaxy Securities.

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