Industrial and Commercial Bank of China (ICBC), the world's largest lender by market value, announced yesterday its first-half net profit climbed 29 per cent from a year ago, buoyed by loan expansion and higher fees and commissions. ICBC's net income met market expectations to rise 109.6 billion yuan (HK$133.8 billion) for the first six months of the year as lending grew 6.6 per cent and net fee and commission income gained 45.8 per cent year on year. All the major mainland banks have reported first-half increases to net profits of 25 per cent or more. Analysts, however, expressed caution about ICBC profits going forward, citing concern that loans to local-government-financing vehicles (LGFV) could turn sour. 'If we look at the absolute figures for the earnings, the mainland's major banks were really growing strongly in the first half,' Zhong De Securities analyst She Minhua said. 'The only problem lies in the potential rise of bad loans that would force them to set aside more provisions in the fourth quarter of this year, hence drag down their full-year growth.' ICBC chairman Jiang Jianqing predicted mainland banks would be 'more active, mature and prudent'. 'We will continue to expand into overseas markets prudently, aiming to increase the contribution of our overseas business to profits from the current 3.8 per cent to 10 per cent in five years,' Jiang said. Investors have shunned bank shares recently over concern about the massive fund-raising demands on mainland lenders. The banks face new capital requirements from regulators to cushion any bad loan explosion after banks went on a lending binge to weather the financial crisis. ICBC's capital adequacy ratio (CAR) rose 6 basis points to 12.33 per cent over the first six months, while core CAR dropped 15 points to 9.82 per cent. Jiang said the lender's CAR could rise 1.17 percentage points, or 117 basis points, to meet new global rules. The bank plans to rely mainly on retained profits to replenish capital over the next three years. Alternatives include issuing subordinated debts and raising 'a small amount' of funds through the capital market. ICBC president Yang Kaisheng said the bank's non-performing loan (NPL) ratio dropped to 0.95 per cent at the end of June and further to 0.92 per cent last month. Outstanding loans to local government financing vehicles, a sector generally regarded as having a high-risk of default, stood at 931 billion yuan at the end of June. Yang said 94 per cent of the loans were 'covered or basically covered' by the projects the loans funded. Mainland measures to crack down on property speculation provide another area of risk. The NPL balance and ratio both declined in the first half, with the ratio at 0.7 per cent for developer loans and 0.37 per cent for individual mortgages in June.