October 26, 2018 / 9:52 AM / 10 months ago

UPDATE 1-China lender BoCom's Q3 profit beats estimates, interest margins widen

* BoCom’s Q3 net profit up 7 pct on-year, better than expected

* NIM 1.47 pct at end-Sept vs 1.41 pct at end-June

* NPL ratio unchanged at 1.49 pct at end-Sept from end-June (Adds details of results)

SHANGHAI/BEIJING, Oct 26 (Reuters) - Bank of Communications Co, China’s fifth-largest listed lender by assets, reported a better-than-expected 7 percent rise in third-quarter profit and tight control of its bad loans, the second major mainland bank to post positive quarterly results.

China’s largest banks are seeing improving margins and a slower build-up of soured debt, helped by aggressive bad loan disposals and government policy such as debt-to-equity swaps.

But not all lenders are enjoying healthier balance sheets. Risks are more significant at smaller, regional lenders as they lack sufficient capability to diversify in terms of geography, industry or clients.

New asset management rules due to come into play in 2020 have already squeezed smaller banks, which depend to a greater extent on income from the sales of wealth management products, analysts said.

BoCom posted a net profit of 16.53 billion yuan ($2.38 billion) for the July-September period, up from 15.44 billion yuan a year earlier. The 7 percent rise was BoCom’s fastest third-quarter profit growth since 2012.

It was also above the 5.5 percent average rise in third quarter net profit estimated by three analysts surveyed by Reuters.

On Tuesday, China Construction Bank Corp , the country’s second-biggest lender, reported a 6.6 percent rise in third-quarter net profit, as its bad loan ratio dipped and interest margins stabilised.

BoCom’s net interest margin was 1.47 percent at end-September, up from 1.41 percent at the end of the second quarter.

The bank’s non-performing loan ratio was 1.49 percent at end-September, unchanged from 1.49 at the end of June.

Other major Chinese banks, including No.1 lender Industrial and Commercial Bank of China , will report next week. ($1 = 6.9435 Chinese yuan renminbi) (Reporting by Engen Tham in SHANGHAI and Shu Zhang in BEIJING; Editing by Muralikumar Anantharaman)

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