China Merchants Bank said its third-quarter earnings jumped by almost half on the back of loan expansion and higher fee-based income. Net profit for July to September totalled 5.75 billion yuan (HK$6 billion) under domestic accounting standards, up 49.5 per cent from a year earlier, the bank announced yesterday. Earnings were higher than UBS analysts' expectation of 5.5 billion yuan and Fox-Pitt Kelton's forecast of 5.2 billion yuan for the third quarter. Profit for the first nine months jumped 90.56 per cent to 18.99 billion yuan, beating the bank's own forecast of more than 80 per cent profit growth from the year-ago period, after excluding its acquisition of Wing Lung Bank. The bank achieved the strong earnings even after it set aside US$78.04 million to cover impairment losses from investments in bonds issued by overseas financial houses including Lehman Brothers Holdings in the first nine months. It credited 'a bigger asset scale, widened interest spread, booming fee and commission business and a lower income tax rate' for the rise. For the nine months, net interest income jumped 53 per cent to 35.76 billion yuan, while fee and commission income surged 33 per cent to 5.84 billion yuan. The bank's non-performing loan ratio was 1.2 per cent, down 0.34 percentage point from January this year. 'Our outstanding loans to small and medium-sized enterprises stood at 216 billion yuan at September-end, accounting for 44 per cent of our loans to domestic companies,' the bank said. 'The NPL ratio of [small and medium-sized enterprises] was 2.67 per cent, 0.95 percentage point lower than [in January].' At the end of September, Merchants Bank had sold all its holdings of Fannie Mae and Freddie Mac bonds and realised a 'small profit'. It held US$70 million of Lehman bonds and none of any subprime mortgage-related securities, the bank said. 'Because of the global financial market turbulence, we recorded an expected loss of US$70.1 million in foreign currency denominated bond investments,' it said. The bank this year took control of Wing Lung Bank to realise its strategic goals of enhancing its competitiveness in the domestic market and gaining an international presence.