China Construction Bank, the second-largest mainland lender by assets, reported its smallest half-yearly profit growth since 2009 as mainland regulatory changes eroded its fee income. The lender reported a better-than-expected first-half attributable profit, up 14.5 per cent year on year to 106.28 billion yuan (HK$129.68 billion). The bank managed a healthy increase in loans while maintaining a low bad-debt ratio. However, growth in its fee income and advisory business tapered off sharply after new regulatory policy changes banned it from freely determining its fees, and investment product sales were hit hard by the mainland's economic slowdown. CCB vice-chairman and president Zhang Jianguo said in a statement yesterday that profit growth was driven mainly by higher interest income and better risk management measures. The group strengthened its risk management, which led to a moderate rise in impairment losses, by 5.84 per cent year on year to 14.74 billion yuan in the first half. Its non-performing loans stood at 70.42 billion at the end of June, down 0.7 per cent from the end of last year. Bank card and wealth management businesses also achieved strong growth in the first half. But interest income, which is the key driver of growth, stood at 295.43 billion yuan, up 32 per cent from a year earlier. Net interest margin rose 5 basis points to 2.71 per cent. This was, however, offset by strong growth in interest expenses, which increased 61.72 per cent year on year in the first half, resulting in net interest income only rising 16.46 per cent. CCB's total gross loans and advances to customers rose to 7.06 trillion yuan at the end of June, up 8.7 per cent from the end of last year. Corporate loans rose 7.27 per cent and personal loans 8.37 per cent. Total assets stood at 13.5 trillion yuan at the end of June, up 9.97 per cent from the end of last year. Bernstein Research last week indicated its preference for bigger mainland lenders such as CCB or its bigger rival Industrial and Commercial Bank of China, as they have a better interest rate margin and better-quality loan portfolios compared with those of smaller lenders.