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UPDATE 1-China's CCB Q2 profit up 9.7 pct, beating expectations
August 25, 2013 / 11:16 AM / 4 years ago

UPDATE 1-China's CCB Q2 profit up 9.7 pct, beating expectations

(Recasts with Q2 result, adds details, background)

* Q2 net profit 60.4 bln yuan vs forecast 58.7 bln yuan

* H1 net profit 119.96 bln yuan vs f‘cast 118.3 billion yuan

* Shares down about 7 pct this year, lagging broader market

HONG KONG/SHANGHAI, Aug 25 (Reuters) - China Construction Bank Corp, the country’s No. 2 lender, posted a 9.7 percent rise in second-quarter net profit, slightly beating expectations as interest margins held steady.

CCB, the first of China’s “Big Four” banks to report results for the latest quarter, made net profit of 60.4 billion yuan ($9.8 billion) in the April-June period, up from 54.78 billion yuan a year earlier, according to a company statement released on Sunday.

The result beat the average estimate of 58.7 billion yuan in a Thomson Reuters poll of four analysts.

Chinese lenders are expected to see profit growth pressured this year amid a slowing economy and interest rate liberalisation measures, although growth remains healthy compared with their Western peers.

Reuters calculated the quarterly figure based on CCB’s first-half results. For the January-June period, net profit rose 12.7 percent to 119.96 billion yuan from 106.28 billion yuan in the same period last year, CCB said. Analysts on average were expecting 118.3 billion yuan in profit.

Its net interest margin, which measures loan profitability, rose slightly to 2.54 percent from 2.53 percent a year earlier. But the bank also made some progress in reducing its reliance on net interest income, with such income growing 10.6 percent in the first half, slower than the 11.2 percent rise in non-interest income.

Analysts expect net interest margins to shrink further in future quarters after the central bank said last month that it was scrapping the floor on lending rates, effectively allowing banks to lend at any discount to the benchmark rate they choose. That would put pressure on the easy fees banks have historically earned from the spread between what they pay depositors and what they charge borrowers.

In a sign that regulators’ efforts to curtail risky shadow banking activities is having an impact - at least among larger banks - CCB said it had issued wealth management products worth 3.2 trillion yuan in the first half, down from 5.4 trillion yuan in the same period last year.

Wealth management-related fee income fell 7.6 percent.

Wealth management products are short-dated investment funds that banks market to households and firms as a higher-yielding alternative to traditional deposits. But regulators have expressed concerns about risky assets underlying these products.

CCB’s non-performing loan ratio stood unchanged from the end of March at 0.99 percent. Concerns have been growing in recent years that NPLs at Chinese banks may spike as the economy slows further.

Hong Kong-traded shares of CCB have fallen 6.9 percent in the year to date, compared with a 3.5 percent decline in the benchmark Hang Seng Index.

CCB executives will hold a news conference on Monday to discuss the bank’s earnings.

Agricultural Bank of China Ltd is scheduled to report results on Wednesday. Earnings from Industrial and Commercial Bank of China and Bank of China are due out on Thursday. (Reporting By Lawrence White and Gabriel Wildau; Editing by Chris Gallagher)

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