Net interest income for the three-month period rose 20.6 per cent to 4 billion yuan, but the annualised net interest margin for the first nine months dipped 0.06 percentage point to 3.4 per cent, the bank said in a statement to the Hong Kong stock exchange yesterday.

Net interest income jumped 21.4 per cent to 11.6 billion yuan in the nine-month period.

Net fee and commission income increased 2.8 times to 199 million yuan in the third quarter, bringing income for the first nine months to 502 million yuan, double from a year ago.

The bank said the robust growth was due to the rapid development of wealth management, agency, bank card and other intermediary businesses.

Chongqing Rural Commercial Bank, which almost doubled its provision in the first half of this year, further increased its impairment on assets by 3.8 times to 227 million yuan, bringing the nine-month total to 690.7 million yuan.

The rise in impairments was linked to the increase in loans and uncertainty in the macro economy, the bank said. Its gross loans and advances to customers grew 14.5 per cent at the end of last month to 198.8 billion yuan from the end of last year.

Chen Xingyu, an analyst with Phillip Securities, said asset quality on the mainland had yet to see an improvement. "Chinese banks are preparing for an increase in bad loans by making more provisions," he said.

Chongqing Rural Commercial Bank said outstanding non-performing loans at the end of September amounted to 1.4 billion yuan, a decline of 297 million yuan from the end of last year, while non-performing loan ratio decreased by 0.28 percentage point to 0.7 per cent.

The improvement in bad-loan ratio was partly because of a larger base after an increase in total loans, Chen said. "The rise in bad loans will remain a concern for the bank."

The impact of interest rate liberalisation was likely to weigh on the bank's net interest margin next year, he added.