State lender says it is close to hiring key officer after reporting 3.9pc fall in profit China Construction Bank Corp, the mainland's third-largest lender, is close to hiring a chief risk officer as part of efforts to tighten risk management, according to chairman Guo Shuqing. Filling the position will end months of searching that began before the state lender's Hong Kong offering in October last year. The new hire may soothe investor unease over the bank's ability to maintain its sharp asset quality improvement achieved through government-supported massive non-performing loan carve-out. 'The search has entered the final stage,' Mr Guo said yesterday in Hong Kong, but declined to reveal further details. In its maiden results following its listing, the bank overcame the end of a tax break, higher provision charges and narrowing net interest margins to outperform analysts' expectations, delivering a smaller than expected 3.95 per cent fall in net profit to 47.1 billion yuan for last year. Twenty-one brokers polled by Thomson Financial had returned a mean estimate of a sharper decline to $44.95 billion. '[It was] mainly due to a lower than expected income tax rate of 14.9 per cent versus our estimate of 21.2 per cent,' Goldman Sachs said in a research note yesterday. Construction Bank in 2004 received an exemption on the bulk of its income tax liabilities to aid its financial restructuring, more than doubling its net profit that year. Its corporate income tax expenses increased 2.8 times last year, although analysts who had been anticipating the end of the tax break had expected worse. 'There will not be such big tax benefits in the future,' Mr Guo said. Operating income rose 12.9 per cent to 128.71 billion yuan. Net interest income rose 14.8 per cent to 116.55 billion yuan as outstanding loans expanded 10.4 per cent to 2.45 trillion yuan, outstripping the average 7.8 per cent loan growth reported by the Big Four state-owned lenders. Net fee and commission income jumped 30.7 per cent to 8.45 billion yuan. However, the more than doubling of loan loss provision expenses to 13.7 billion yuan and a 1.3 billion yuan foreign currency dealing loss reduced pretax profit to a level 5.6 per cent below Goldman's forecast. The provisions lifted loan loss provision coverage by five percentage points during the year to 67 per cent in December when only specific provisions were counted, bank president Chang Zhenming said. Adding general provisions, the ratio would rise to 77 per cent. The bank was well-placed to reach the government-set provision coverage target of 80 per cent before next year's deadline, Mr Chang said. The bank trimmed its non-performing loan ratio by 0.08 percentage point to 3.84 per cent by December. Special mention loans, just above non-performing, fell 4.9 percentage points to 11.8 per cent of outstanding lending. However, net interest margins declined 0.04 percentage point to 2.78 per cent. Executive vice-president Fan Yifei attributed it to the three percentage point rise in higher-rate term deposits in its liability mix. Faster deposit than loan growth reduced the bank's loan-deposit ratio by 2.4 percentage points to 61.4 per cent, compounding the effect in a year when excess liquidity depressed money market yields.