world growth

world growth

Thursday, August 21, 2008

China's ICBC is world's most profitable bank

Not bad ! Considering couple of years ago people believed Chinese banks were insolvent.

China's ICBC Q2 jumps; world's top-earning bank

Hong Kong

By Kennix Chim and Eadie Chen

HONG KONG/BEIJING, Aug 21 (Reuters) - Industrial & Commercial Bank (other-otc: CBDP.PK - news - people ) of China Ltd (ICBC), the world's biggest bank by market value, posted a 41 percent rise in second-quarter profit, buoyed by widening interest margins and fee income growth.

Despite the strong results, analysts are worried that borrowers in key sectors such as small and mid-sized businesses and real estate risk defaulting as a weakening global economy takes its toll. Non-performing loans at ICBC and other Chinese banks are expected to rise in the second half.

Samuel Chen, banking analyst at JP Morgan, said ICBC's profit growth would slow in the second half.

"The market is concerned about the bank's asset quality, but I think the provisions will be stable in the second half," said Chen, who has an outperform rating on ICBC.

Like most Asian banks, ICBC's subprime-related holdings in the West are small relative to its size, leaving the sector comparatively unscathed by the fallout from the U.S. subprime crisis that has battered western peers.

ICBC, which has a market value of $235 billion, said the nominal value of its Alt-A residential mortgage-backed securities (RMBS), subprime RMBS and structured investment vehicles (SIVs) totalled $1.92 billion, and it had made allowances of $702 million for losses on the value of such holdings.

It said it held bonds related to Fannie Mae (nyse: FNM - news - people ) and Freddie Mac (nyse: FRE - news - people ), the troubled U.S. mortgage agencies, totalling $2.7 billion, or a fifth of 1 percent of total assets.

ICBC, in which Goldman Sachs (nyse: GS - news - people ), Allianz (nyse: AZ - news - people ) Group and American Express (nyse: AXP - news - people ) hold stakes, posted April-June earnings of 31.4 billion yuan (4.6 billion), based on Reuters' calculations from its first half earnings, compared with 22.3 billion yuan a year earlier.

Net profit for the first half rose to 64.5 billion yuan ($9.4 billion) from 41 billion yuan, making ICBC the biggest-earning bank globally, ahead of London-based HSBC Holdings , which earned $7.72 billion

That put ICBC ahead of Chairman Jiang Jianqing's target set in June to be the world's most profitable bank in five years.


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