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Bocom forecasts 63pc profit increase

Second-half surge seen as lender rides nation's fast economic expansion

Bank of Communications, the mainland's sixth-largest lender, expects earnings this year will surge 63.1 per cent to more than 20 billion yuan as it benefits from growth in the world's fastest-growing major economy.

The bullish forecast by bank chairman Jiang Chaoliang (right) at the Communist Party congress in Beijing yesterday implies growth will accelerate in the second half of the year.

Shanghai-based Bocom, 18.6 per cent owned by HSBC, posted a half-yearly profit of 8.56 billion yuan, a 41.8 per cent increase on the year-ago period. Net profit last year jumped 32.7 per cent to 12.26 billion yuan.

'It is no surprise, considering most mainland lenders have recorded over 50 per cent profit growth in the first half,' said Bear Stearns analyst Steven Chan.

'The majority of them will continue to benefit from expansion in net interest margin, strong fee income and improvement in asset quality in the second half.'

China Merchants Bank, Shenzhen Development Bank and China Minsheng Banking Corp all expect their nine-month earnings to climb at least 70 per cent.

Bocom is scheduled to release nine-month results on Sunday.

Guotai Junan Securities expects Bocom profit to increase by at least 70 per cent in the nine months to September on rising lending and fee income, helped by the fast-growing securities and credit card businesses.

Net fee and commission income at Bocom jumped 139.3 per cent to 3.1 billion yuan in the first half.

'Provision for impairment in the second half is likely to decrease on improving credit quality,' said Wu Yonggang, a Guotai Junan analyst.

Bocom said in August it was lowering its second-half loan-growth target to 15 per cent from 20 per cent as Beijing attempts to limit loan growth through credit tightening. The People's Bank of China could raise interest rates again this month, the sixth such move this year.

'As the loan-to-deposit ratio of large state-owned banks is around 50 per cent, the impact from the two rate increases in the second half is overall neutral,' said Mr Chan. 'Higher-yield loans may result in higher cost of funding. But [Bocom] may do more individual deposits to balance the asset-liability structure.'

Bocom shares in Shanghai yesterday gained 2.67 per cent to a record high of 15.38 yuan. Its H shares fell 4.87 per cent to HK$10.94.

The lender's shares in Hong Kong soared 12.5 per cent on October 9 on speculation that HSBC will lift its stake to 19.9 per cent.

HSBC Asia-Pacific chief Sandy Flockhart declined to comment on Monday.

Strength in numbers

Bank of Communications says earnings for this year will exceed, in yuan: 20b yuan

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