* BoC maintains interest margins by limiting costlier
* Capital adequacy ratio rises to 12.95 percent
* Bad loans set to rise in China-regulator
(Adds details on capital adequacy ratio boost; background on
HONG KONG/SHANGHAI, April 24 Bank of China (BoC)
, the country's fourth-largest lender by market
value, posted a higher-than-expected 13.9 percent rise in
first-quarter net profits as net interest margins widened and
its capital ratio improved.
BoC's higher profit and rising capital adequacy, a
measure of financial strength, will give comfort to investors as
Chinese lenders brace for an expected rise in bad loans in the
country this year as growth slows.
The bank's net profit rose to 45.4 billion yuan ($7.28
billion) in the first quarter, up from 39.8 billion yuan in the
same 2013 period, according to the bank's unaudited financial
statement posted in Hong Kong on Thursday.
The bank's rise in profits was higher than an average
estimate of 41.8 billion yuan calculated from a Thomson Reuters
poll of eight analysts.
"Bank of China, unusually among its peers, has been able to
increase net interest margins by limiting the amount of high
cost deposits it holds," said Raymond Yung, financial services
leader for China at PriceWaterhouseCoopers in a media briefing
ahead of the results announcement.
BoC's total capital adequacy rose sharply to 12.95 percent,
compared to 12.46 percent at end-December last year. The capital
adequacy ratio, a measure of a bank's financial strength, is one
of the key metrics Chinese regulators are monitoring as China's
slowing economy triggers a rise in bad loans.
Chinese banks' non-performing loan ratio rose to its highest
level in two years in the last three months of
BoC's sharp rise in capital adequacy suggests the bank may
struggle less than smaller peers to meet tough new requirements
that the bank regulator began implementing last year in line
with the global bank capital rules known as Basel III.
BoC's non-performing loan ratio increased slightly to 0.98
percent at end-March compared to 0.96 percent at end-December.
A senior bank regulator said earlier this month that bad
loans are likely to rise this year as the government seeks to
reduce overcapacity in some industries,
Net interest income was 76.5 billion yuan in the first
quarter, a year-on-year increase of 14.2 percent while gains in
net fees and commissions hit 29.0 billion yuan, a rise of 17.1
percent from the same period last year.
The bank's net interest margin was 2.29 percent at the end
of the first quarter, from 2.24 percent at the end last year.
BoC's shares closed up 0.88 percent in Hong Kong on
Thursday, ahead of the results announcement.
($1 = 6.2376 Chinese Yuan)
(Reporting by Shanghai Newsroom and Gabriel Wildau, and
Lawrence White in HONG KONG; Editing by Miral Fahmy)