* Q3 net profit 34.8 bln yuan, f'cast 32.7 bln yuan
* Q3 net interest margin 2.12 pct vs 2.1 pct in H1
* NPL ratio at 0.93 pct vs 0.94 pct at end-June
HONG KONG, Oct 25 Bank of China Ltd,
the country's No.4 lender by market value, posted its biggest
quarterly profit gain in a year, beating estimates, as interest
margins widened following increased demand for credit.
Net profit rose to 34.76 billion yuan ($5.57 billion) in
July-September from 29.8 billion yuan a year earlier. That
compares with the average estimate of 32.7 billion yuan in a
Reuters poll of 12 analysts.
Net interest margin, which measures loan profitability,
widened to 2.12 percent at the end of September from 2.1 percent
at the end of June.
The wider interest margin indicates Chinese banks are
benefiting from the central bank's decision in June to give
lenders more flexibility in setting their own rates by raising
the ceiling on deposit rates and lowering the floor on lending
The policy shift initially fuelled concerns that interest
margins would be hit.
Bank of China is the first of the so-called "Big Four"
Chinese banks to report earnings for the third quarter, and its
wider margins set a strong tone for its peers.
Bank of China's total loan book expanded about 9 percent in
January-September, pointing to rapid loan growth in the third
quarter. In the first half, its loan book grew only 6.5 percent.
While increased demand for loans has boosted net interest
margins, overall earnings growth remains constrained by new
regulations implemented by regulators that restrict the kind of
fees banks can charge.
For many years, Chinese consumers were charged for services
that are free in most other markets, such as changing an
Internet banking password and withdrawing cash from ATMs outside
their home city. Banks dropped those fees this year.
Fees and commission income, which fuelled much of Bank of
China's earnings growth in the past two years, remained flat in
the third quarter from a year earlier at about 17 billion yuan.
That compares with the 14 percent growth it recorded in
Widening worries about bad loans lurking in China's banking
system have also dimmed the outlook of lenders.
Goldman Sachs analysts estimate that the actual
system-wide non-performing loan ratio may be about six times
higher than the official reported rate of 0.9 percent.
Bank of China said its non-performing loan ratio
stood at 0.93 percent at the end of September, down from 0.94
percent at the end of June. However, overall non-performing
loans rose to 64.1 billion yuan from 63.6 billion yuan at the
end of June.
Bank of China's Hong Kong-listed shares are up about 10
percent so far this year, lagging the 14 percent rise on the
benchmark Hang Seng index.
The stock rose 1 percent to close at HK$3.15 on Thursday,
before the earnings announcement.
Industrial and Commercial Bank of China Ltd,
Agricultural Bank of China Ltd and China Construction
Bank Corp will report earnings through Oct. 30.
(Reporting by Kelvin Soh; Editing by Ryan Woo)