China's ICBC says profit up 12.5 percent

BEIJING (AP) — Industrial & Commercial Bank of China Ltd., the country's biggest state-owned commercial lender, says its first-half profit rose 12.5 percent despite a slowing economy.

ICBC said it earned 123.2 billion yuan ($19.6 billion), or 0.35 yuan (5 U.S. cents) per share, on revenue of 262.8 billion yuan ($41.7 billion) in the six months ending June 30. Interest income rose 30 percent to 354.5 billion ($56.3 billion).

China's banks have prospered from its quick rebound after the 2008 global crisis but face a squeeze on profits due to an economic slowdown that saw growth fall to a three-year low of 7.6 percent in the second quarter. The government has cut interest rates twice since early June and told banks to step up lending to support a recovery.

Bank profits also are likely to be squeezed by interest rate reforms launched this year that are meant to promote economic efficiency by giving banks more flexibility in setting loan and deposit rates. Analysts say that will squeeze the wide guaranteed margins banks have enjoyed until now.

"With the faster progress of reform of interest rate to become more market-oriented, the benchmark deposit and lending interest spreads may be further narrowed, restricting the growth of bank profitability," said an ICBC statement.

ICBC is the third of China's "big four" major state-owned commercial lenders to report profits this year. Bank of China Ltd. and Construction Bank of China Ltd. both reported strong first-half profit growth but issued similar warnings of tougher conditions in coming months.

Chinese banks avoided the mortgage-related turmoil that battered Western lenders and are among the world's strongest financially. Analysts warn, however, that they face a potential rise in bad loans due to the flood of government-ordered lending in 2009 that helped China recover from the global crisis.

ICBC said its total assets rose 10.3 percent over a year earlier to 17.1 trillion yuan ($2.7 trillion).



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