'In the first half, we closely monitored the macroeconomic situation changes, streamlined our business structure and achieved good results,' the bank said.

'For the second half, we will continue expanding services to small enterprises, ensure the healthy development of fee and commission business and control credit risks.'

The bank generated 135.74 billion yuan of revenue in the first half, up 36.04 per cent year on year. Net interest income rose 24.51 per cent to 111.08 billion yuan, while fee and commission income surged 59.3 per cent to 20.17 billion yuan.

Earnings per share were 25 fen, up 10 fen from a year ago. Total assets rose 6.96 per cent to 7.06 trillion yuan and liabilities climbed 6.9 per cent to 6.6 trillion yuan.

'The group will further analyse the macroeconomic environment, study new issues arising from the market movements, adjust the operational strategy timely, overcome any unfavourable impact of external factors on its operations and strive to realise its operating targets for 2008,' said Zhang Jianguo, the bank's vice-chairman and president.

The bank's non-performing loan ratio dropped 0.39 percentage point from the end of last year to 2.21 per cent. Its capital adequacy ratio - which measures a bank's ability to cover losses with its own capital - declined 0.52 percentage point to 12.06 per cent.

The bank said it held bonds totalling US$3.25 billion that were related to Fannie Mae and Freddie Mac, the troubled US mortgage agencies. This is far less than the US$7 billion estimate by some overseas brokerages.

'Considering bonds' credit rating and market elements, we made US$671 million depreciation provisions for the bonds related to the US subprime loans on June 30, which was US$410 million more than the end of last year,' it said.

Shanghai Pudong Development Bank, partly owned by Citigroup, also announced its first-half results yesterday, saying profit rose 150 per cent to 6.37 billion yuan on improved loan margins and lending.

Higher profit may lift investor appetite for Pudong Bank's plan to sell as many as 800 million shares in an additional offering to boost capital.

Concerns over a slowdown in profit growth and a stock market slump have triggered a 46 per cent plunge in Pudong Bank's shares this year.

'For the remainder of this year, I don't expect a big slowdown in the banks' net profit growth. The supporting factors are still there, including lower income tax and rising fee income,' said Yuan Lin, an analyst at BOC International Holdings.

'I think mainland banks' net profit will increase more than 50 per cent year on year for the full year.'

Haitong Securities analyst Qiu Zhicheng said the banks' profitability for the second half could be weighed down by rising funding costs when people shifted to longer-term deposits from demand deposits amid a stock market downturn.

'It is not for sure the fee and commission income will rise and operating expenses will drop. There is uncertainty over banks' profit growth,' Mr Qiu said.