Bank of China posts sharply lower profit growth
The lender's first-half profit growth rate is less than half the 19 pc recorded last year, when it benefited from a one-time gain
Bank of China, the mainland's fourth-largest lender by assets, says profit growth slowed sharply in the first half of this year because of a weaker economy, regulatory changes and the absence of one-time gains that bolstered earnings last year.
Net profit rose 7.6 per cent to 71.6 billion yuan (HK$87.6 billion) in the first six months compared with a year earlier. That was less than half the 19 per cent profit growth rate recorded in 2011.
Last year, the bank's earnings benefited from a one-time recovery of provisions that had been taken for the Lehman Brothers Minibonds Repurchase Scheme. Its subsidiary, Bank of China Hong Kong, was one of 16 banks that agreed to compensate investors for their losses related to the minibonds.
If this effect was excluded, the bank's net profit in the first half would been up 12.22 per cent instead of 7.6 per cent.
The bank's net interest margin, the spread between lending income and funding costs, fell 0.01 percentage point to 2.1 per cent compared with the same period last year. Domestic lending profitability was hit more severely than its cross-border business at BOCHK, because of policy changes to promote interest rate liberalisation on the mainland.
Beijing allowed banks in June to offer depositors interest rates above benchmarks set by the central bank, effectively compressing earnings related to the loan business as competition to vie for deposits intensified.