Merchants Bank says earnings climb 110pc
China Merchants Bank, the mainland's seventh-largest lender, estimates profits for last year surged more than 110 per cent as the country's economic growth prompts companies and consumers to borrow more and encourages sales of wealth management products.
Based on the lender's 7.11 billion yuan profit in 2006, its earnings last year would amount to at least 14.93 billion yuan. The estimate was unaudited, Merchants Bank said.
'One major driver is the selling of wealth management products. The sizzling stock market gave it a strong push in fee income last year,' said China Construction Bank analyst Bonnie Chan.
As Beijing is tightening loan growth and competition with foreign banks is rising, mainland lenders are expanding fee-based businesses such as mutual funds.
Merchants Bank attributed the substantial rise in profit to an increase in operating scale, accelerated growth in non-interest income and effective cost controls. 'It is anticipated that the effective income tax rate would decrease also,' it said.
Merchants Bank reported net profit of 3.9 billion yuan in the first nine months of last year, a rise of 128 per cent from the same period in 2006. The growth rate was the highest among all listed mainland lenders, followed by rival Industrial and Commercial Bank of China, the country's largest lender, which reported a 66 per cent year-on-year increase in its net profit in the first three quarters.
Industry watchers said Merchant Bank's lack of exposure to the troubled US subprime mortgage market would allow its profit to grow faster than those that needed to make provisions for such investments.
Merchants Bank said last year that it sold about US$20 million in subprime-related investment in 2006 after a 13.4 per cent return. It had no loans to corporates or funds involved in subprime-related business.
