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Record quarter for ICBC as loan margins widen

By Bloomberg (Agencies) Updated: 2014-08-29 07:15

Industrial & Commercial Bank of China Ltd, the world's largest lender by assets, posted a record quarterly profit by boosting loan margins and limiting provisions for bad loans.

Net income climbed 7.5 percent to 74.8 billion yuan ($12.2 billion) in the second quarter, based on figures released by the bank on Thursday. That matched the median estimate of 74.8 billion yuan from 13 analysts surveyed by Bloomberg.

Second-quarter profit growth compared with a 6.6 percent gain in the first quarter, the slowest pace since 2009.

ICBC increased loan-loss provisions by less than its rivals including Bank of China Ltd and Agricultural Bank of China Ltd, limiting the drag on profit.

The nation's biggest lenders are grappling with rising bad loans and a cooling economy as they enter an era of annual profit growth of less than 10 percent.

"The pace of the bank's lending growth may slow in the second half, and the cost of its funding will likely increase amid China's economic slowdown," said Yuan Lin, a Beijing-based analyst at BOC International Holdings Ltd.

The net interest margin widened to 2.62 percent from 2.57 percent a year earlier.

Loan-loss provisions increased 6 percent year-on-year to 10.4 billion yuan in the second quarter.

Bank of China, the nation's fourth-largest bank, last week reported that it had more than doubled such provisions. ABC's provisions rose 56 percent.

At ICBC, nonperforming loans rose almost 13 percent in the first half to 105.7 billion yuan, even after the lender wrote off 12.7 billion yuan of bad debt. Combined earnings of China's five biggest banks are projected to rise 7 percent this year, the least in more than a decade, according to analysts' estimates.

Banks face severe challenges amid an economic slowdown and interest rate deregulation, China Banking Regulatory Commission Chairman Shang Fulin said last month. Credit risks will rise, and the restructuring of industries with overcapacity will expose more problems, Shang said.

ICBC's net income rose 7 percent to 148.1 billion yuan in the first half, the bank said. Net interest income was up 10 percent to 237.6 billion yuan. Net fee and commission income rose 8.7 percent. The bank had 10.6 trillion yuan of loans as of June 30, up 7.3 percent from the end of last year.

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