Bank of Communications, the mainland's fifth-largest lender, said yesterday its first-half earnings were almost unchanged from a year ago, as soaring loans and handsome fee income helped offset a narrower net interest margin. The Shanghai-based bank earned 15.56 billion yuan (HK$17.65 billion) in the first six months of the year, a scant 0.3 per cent increase from a year ago. 'It was not easy to post flat first-half earnings in the current situation,' said Yu Yali, Bocom's chief financial officer. 'After all, interest income is still a major cash cow for Chinese banks.' The lender's net interest margin dropped to 2.21 per cent from 3.16 per cent, a result of interest rate cuts by the central bank since late last year. Bocom, 19.9 per cent owned by HSBC Holdings, had 29.8 billion yuan interest income, down 9.8 per cent year on year. Fast credit growth stemming from the government's stimulus package offset the negative impact of the smaller interest margin. Outstanding loans at the end of June climbed 400.6 billion yuan, or 30.15 per cent, from the end of last year and topped 1.73 trillion yuan. The bank's interest income made up 80 per cent of its total first-half operating income, Ms Yu said. Fee-based income increased 17.7 per cent to 5.48 billion yuan. Bocom pioneered the move among major publicly traded Chinese banks to report interim earnings. Other state-owned banks, including Industrial and Commercial Bank of China, Bank of China and China Construction Bank Corp, have yet to unveil their interim results. In the first quarter of this year, Bocom reported earnings of 7.94 billion yuan, up 0.53 per cent. 'Compared with other state titans, Bocom has been less favoured under the loose monetary policy and reinforced government spending,' said Linus Yip, a strategist at First Shanghai Securities. 'Looking down the road this year, it might benefit from expected policy incentives in such areas as consumer credit. These are businesses it has cultivated over the past few years. Its efforts would pay dividends.' Mr Yip said Bocom's half-year results were in line with market expectations. The bank's first-half performance beat that of the country's medium-sized joint-stock commercial banks. According to the China Banking Regulatory Commission, 12 joint-stock commercial banks reported an average 20 per cent profit decline as the largest state banks dominated the recent credit boom. Bocom chairman Hu Huaibang said lending growth would slow in the second half and the bank would shift its focus towards quality small and privately owned firms that needed capital to fund growth. The bank's impaired-loan ratio stood at 1.51 per cent as of June 30, down 41 percentage points from the end of last year. It reserved 4.52 billion yuan to cover bad loans, up 13.5 per cent year on year.