Bank of China

BOC earnings jump as lending rates increase

PUBLISHED : Saturday, 28 April, 2007, 12:00am
UPDATED : Saturday, 28 April, 2007, 12:00am

Bank of China, the nation's second-biggest lender, said first-quarter underlying profit jumped 59.5 per cent as higher borrowing rates helped to drive up net interest income.

Underlying profit rose to 15.9 billion yuan in the three months to March from the same period last year, the company said yesterday, citing unaudited numbers based on international accounting standards.

Net income rose 17.6 per cent to 11.71 billion yuan or five fen a share from 9.96 billion yuan or five fen a share a year earlier, held back by a revaluation of deferred-tax assets.

Income tax surged 77 per cent to 11.57 billion yuan for the quarter. The tax expense was calculated taking into account state legislation to lower the tax rate for domestic enterprises from 33 per cent to 25 per cent since last month.

Earnings growth was driven by a 31 per cent increase in net interest income to 34.37 billion yuan, boosted by a widening interest margin after the People's Bank of China raised interest rates twice this year.

Loans grew 6.54 per cent to 2.49 trillion yuan while deposits increased 5.14 per cent to 4.3 trillion yuan during the quarter.

BOC, which benefited from higher earnings of its BOC Hong Kong (Holdings) unit, recorded a 64 per cent jump in net fee and commission income to 5.2 billion yuan in the first quarter.

However, the lender recorded a net trading loss of 735 million yuan, compared with a net trading gain of 1.14 billion yuan during the same period last year.

BOC (HK), 65.87 per cent owned by BOC, said operating profit before loan impairment charges rose to HK$4.1 billion in the first quarter, without providing year-ago figures.

'Net interest margin and net interest spread also improved,' BOC (HK) said.

'The growth of net fee and commission income was fuelled by active stock brokerage business and strong sales of funds on the back of a buoyant local stock market.'

BOC H shares, which have risen 32.5 per cent since its initial public offering in June last year, dropped 1.01 per cent yesterday to HK$3.91 before the release of the earnings announcement.

Meanwhile, China Merchants Bank, the nation's seventh-largest, said first-quarter profit rose 72 per cent under mainland accounting standards, boosted by loan growth and increased fees.

Net income surged to 2.46 billion yuan or 17 fen a share from 1.43 billion yuan or 12 fen a share, a year earlier, the Shenzhen-based bank said.

Outstanding loans grew 9.2 per cent in the three months to 600.2 billion yuan from the restated year-earlier figures.

Net interest income rose 54.2 per cent to 6.8 billion yuan while net fees and commission income doubled to 950 million yuan.

The bank's H shares, up 127 per cent since their listing in September last year, dropped 0.72 per cent yesterday to HK$19.42.