CORRECTED - CORRECTED-UPDATE 1-China's ICBC H1 surges more than half, risks

Amends second paragraph to make clear reference is to first half of 2007, not 2008. (Adds details, analysts comment)

By George Chen and Edwin Chan

SHANGHAI/HONG KONG, July 3 (Reuters) - Industrial and Commercial Bank of China (ICBC) (1398.HK) grew 2008 first-half net profit by more than half, the bank said on Thursday, as income from lending and services boomed.

The bank put its net profit at 40.84 billion yuan ($6 billion) in 2007's first half based on Chinese accounting standards. That would outshine beleaguered global rivals and could offer a boost to struggling Chinese financial stocks.

China's largest commercial bank, in which Goldman Sachs (GS.N), Allianz (ALVG.DE) and American Express (AXP.N) hold stakes, has been expanding along with domestic peers into services such as wealth management to broaden revenue beyond plain-vanilla loans.

Analysts say the country's banking industry should post at least 60 percent income growth on average in the first half and ICBC's upbeat forecast could be followed by other rosy projections from rivals, which include China Construction Bank (0939.HK) (601939.SS) and Bank of China (3968.HK) 6013968.SS.

"That's certainly very good news for the whole banking industry and may surprise some of the more pessimistic investors tomorrow," said Wu Yonggang, a senior banking analyst with Guotai Junan Securities in Shanghai.

"ICBC is the biggest bank. If it can achieve that (50 percent growth), then smaller rivals, especially some city commercial banks, may have done even better than ICBC despite so many industry and market challenges."

But some investors worry ICBC's exposure to U.S. subprime mortgage-backed securities -- at $1.2 billion at the end of March -- along with inflation, a deceleration of growth in China, a potential fall in property values and higher defaults could take a toll on the bank's bottom line in the second half.

ICBC's profit projection stands in contrast to dismal results from Wall Street banks.

BUMPER QUARTER

Morgan Stanley (MS.N) saw second-quarter earnings plunge 57 percent while Lehman Brothers LEH.N posted its first loss as a public company.

ICBC shares slid 4 percent in Hong Kong on Thursday. Since its October peak, the bank's stock has shed a third of its value, yet has outperformed a 45 percent decline in the index of Chinese firms listed in Hong Kong .HSCE.

Some analysts expected China's banks, which focus heavily on lending, to extend a bumper first quarter despite several of the largest players booking charges for exposure to distressed credit markets.

Bank of China, hardest-hit among the country's lenders by its exposure to subprime holdings, had booked an impairment allowance of $1.5 billion by the end of March.

ICBC, which owns about a fifth of South Africa's Standard Bank (SBKJ.J), is coming off a strong first three months.