China Construction Bank Corp., the world’s second-largest lender by market value, said first-half profit jumped 31 percent to a record as credit demand climbed.
Net income rose to 92.8 billion yuan ($14.5 billion), or 0.37 yuan a share, from 70.7 billion yuan, or 0.3 yuan, a year earlier, the Beijing-based lender said in a statement to the Shanghai stock exchange. Profit almost matched the 91.5 billion yuan median estimate of eight analysts surveyed by Bloomberg News.
Construction Bank joined smaller rival Bank of Communications Co. in reporting record first-half profit as demand for loans climbed in the world’s second-largest economy. Lending profitability also improved after China raised interest rates three times this year. Still, the lender’s Hong Kong-listed shares lost about a quarter of their market value this year on investors’ concerns that defaults may climb.
“The focus going forward is credit quality instead of credit growth,” Wilson Li, a Shenzhen-based analyst at Guotai Junan International Holdings Ltd., said by telephone before the results were announced. “The biggest challenge to Chinese banks in the second half is the potential economic slowdown. If that happens, there’s a risk that bad loans will rise a lot.”
Construction Bank’s non-performing loan ratio narrowed to 1.03 percent from 1.14 percent at the beginning of the year, while the provision coverage ratio increased to 244.68 percent of non-performing loans from 221.14 percent.
China’s banking regulator has asked banks to increase capital buffers and accelerate loan collection schedules for local government debt amid mounting concern that a record $2.7 trillion two-year credit boom starting in 2009 will leave lenders with soaring defaults if economic growth falters.
Net interest income, or revenue from lending minus payments to depositors, climbed 24 percent to 145.7 billion yuan while net fee and commission income increased 42 percent to 47.7 billion yuan. Net interest margin, a measure of lending profitability, widened to 2.66 percent from 2.41 percent a year ago.
Shares of Construction Bank have dropped 24 percent in Hong Kong this year, compared with a 16 percent decrease in the benchmark Hang Seng Index. The stock shed 3.3 percent to close at HK$5.27 on Aug. 19.
Shareholders of the state-controlled lender, established in 1954 to fund roads, bridges, dams and other public works, approved a plan to raise as much as 80 billion yuan from the sale of yuan-denominated subordinated notes by the end of August 2013 to replenish capital, the bank said Aug. 18.
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