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China Construction Bank profits up 71 percent

China Construction Bank profits up 71 percent

China Construction Bank Corp., the country's second-largest commercial lender by assets, says first-half profits jumped 71 percent as it avoided the credit crisis that is hammering U.S. and European lenders.
The bank warned, however, that it faces a tougher second half as Beijing tightens credit to contain inflation pressures.
Profit for the six months ending June 30 was 58.6 billion yuan (US$8.5 billion), or 0.25 yuan (3 U.S. cents) per share, the Beijing-based bank announced late Friday. The bank reports results every six months, rather than quarterly.
Construction Bank said both lending and fee-related business grew strongly, driven by a boom that is expected to see China's economy expand by at least 9 percent this year. Profits rose in every region except for China's west, where an earthquake in May killed some 70,000 people and devastated the local economy.
"All lines of business grew steadily," the bank said in a statement.
Profits for China's state-owned banking industry have risen sharply in recent years as commercial lending grows and banks improve efficiency.
Chinese lenders have little exposure to U.S. subprime debt and the mortgage lending that has hurt American and European banks.
Construction Bank recorded US$671 million in allowances for possible losses on U.S. subprime mortgage debt, but said those securities should not affect earnings because they are only a small proportion of its foreign holdings.
The bank said it held securities worth US$3.2 billion issued by U.S. mortgage lenders Fannie Mae and Freddie Mac as of the end of June, including US$695 million in mortgage-backed securities.
Construction Bank warned that it would face challenges in the remainder of the year as the government tightens credit to tamp down inflation pressures.
"Under the restrictive monetary policy, tightening credit will adversely affect banks' profit growth, and (the) rising deposit reserve rate will put more pressure on banks' liquidity management," it said. "Besides, the credit risks with industries subject to the macroadjustments and certain personal borrowers may increase."
Regulators have steadily raised interest rates over the past three years to contain pressure for prices to rise. They have tried to slow growth in the pool of money available for lending by raising the share of deposits that banks must hold in reserve. Some economists say the reserve ratio is now so high that some banks will have trouble lending enough money to pay higher state-set interest rates on deposits.
Also this week, China's biggest commercial lender, Industrial & Commercial Bank of China Inc. said first-half profits rose 57 percent to 64.5 billion yuan (US$9.4 billion). ICBC said that made it the world's most profitable bank this year.
Construction Bank said its first-half net interest income rose 24.5 percent over the same period last year to 111.1 billion yuan (US$16.2 billion). Net fee and commission income soared 59 percent to 20.2 billion yuan (US$2.9 billion).
Despite the financial turmoil abroad, the bank said first-half profit for its foreign operations was 1.7 billion yuan (US$248 million), though it gave no comparative figures.
Assets rose to 7.05 trillion yuan (US$1.03 trillion) as of June 30, up 6.96 percent from the start of the year, the bank said.
In a reflection of growing efficiency, the bank said its return on equity _ a measure of how well it uses its assets _ rose to 26.36 percent in the first half, up from 19.8 percent in the same period last year.
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Updated : 2021-06-21 09:42 GMT+08:00