Industrial and Commercial Bank of China (ICBC) has set an ambitious target of reducing non-performing loans (NPLs) to as little as 3 per cent of its loan book in the next eight years. 'We are aiming to reduce our NPL ratio to between 3 per cent and 5 per cent by the end of 2010, and achieve operating profit close to 100 billion yuan (HK$93.7 billion),' Jiang Jianqing, the president of ICBC, said. His comments came as China's largest commercial bank revealed a 46.4 per cent increase in bad loan provisions to 25.59 billion yuan last year, sucking in 58.3 per cent of its operating profit during the 12 months. Mr Jiang's bold vision is set against long-standing debate among analysts on whether the big four state banks' mountains of NPLs, a result of decades of irrational, policy-oriented lending, will evolve into a full-blown financial crisis. As a first step, the bank would strive to reduce its NPL ratio to less than 10 per cent by the end of 2006, Mr Jiang said. ICBC, which commanded 21 per cent and 22 per cent of the country's outstanding loans and deposits last year, said its NPL ratio had fallen 4.09 percentage points to 25.69 per cent at the end of last year. The ratio was calculated using the more stringent five-category loan classification scheme. Beijing has ordered ICBC and the rest of the big four banks - China Construction Bank, the Agricultural Bank of China, and Bank of China - to reduce their NPL ratios to less than 15 per cent by 2006. The big four bank's average NPL ratio fell 4.92 percentage points to 26.1 per cent at the end of last year, the People's Bank of China said in February. The absolute value of ICBC's NPLs edged down 4 per cent to 7.59 trillion yuan last year. That figure could ease analysts' concerns that reduction of the big four's NPL ratios has been driven primarily by the dilution effect of expanded loan books. ICBC reported a 6.39 per cent increase in net profit to 6.17 billion yuan last year. Loans rose 11.22 per cent to 2.95 trillion yuan, and deposits increased 13.31 per cent to 4.05 trillion yuan. Over the year, the bank closed down 2,415 outlets and reduced its workforce to about 405,000 at 25,960 outlets, the annual report said.