Bank of China Profit Rises 17% on Loan Growth

A Bank of China branch in in Taiyuan, Shanxi Province. ReutersA Bank of China branch in in Taiyuan, Shanxi Province.

HONG KONG – The Bank of China, the first of the country’s major state-owned lenders to report third-quarter results, said on Thursday that its profit rose 16.6 percent from the period a year earlier, exceeding analysts’ expectations.

Fresh signs that the world’s second-biggest economy after the United States may have turned a corner have stimulated demand for new loans, and analysts are forecasting that China’s biggest banks will report strong earnings growth for the three months ended Sept. 30.

Bank of China, the smallest of China’s so-called Big Four lenders by assets – the others are the Industrial and Commercial Bank of China, China Construction Bank and Agricultural Bank of China – said third-quarter net income rose to 34.8 billion renminbi ($5.6 billion). Analysts had expected profit of 33 billion renminbi.

Related Links

The result was a rebound from the second quarter, when the bank reported a year-on-year profit increase of just 5.2 percent, its slowest growth in quarterly profit in three years.

New lending drove the increase in earnings. For the quarter, Bank of China said total assets expanded 7.7 percent, to 12.74 trillion renminbi, from the period a year earlier. The result was a 14.5 percent rise in net interest income, to 65.4 billion renminbi.

Wary of signs that Beijing may be moving to partly deregulate the nation’s fixed-interest rate regime, which guarantees banks a comfortable margin between their lending and deposit rates, many Chinese banks have in recent years been seeking to reduce reliance on the loan business by tapping other sources of income.

Bank of China, however, appeared to head in the opposite direction during the third quarter, with net interest income driving results while earnings from transaction fees and commissions lagged.

Net fee and commission income fell 1.1 percent, to 15.68 billion renminbi, from the year-earlier period. By contrast, the rise in net interest income coincided with the increasing profitability of the lending business.

Bank of China’s net interest margin widened to 2.12 percent at the end of September, up slightly from 2.1 percent at the end of June, after regulators moved this summer to partly loosen lending and deposit rates.