Profit growth rises at Bank of China, but so do bad loans

By Dow Jones

Bank of China reported a jump in bad loans in the first half of this year even as its profit growth picked up, sounding a cautious note for big Chinese banks as they report results amid slowing economic growth.

The central bank vowed earlier this year to push interest-rate liberalization over two years, but progress has been slow. "The rise in funding costs has exerted pressure to the bank's efforts to widen its interest margin," said Mr. Chen, the president. "Bank of China has actively improve its liability structure and strived to boost business revenues from overseas operations.

Bank of China said Tuesday that its net profit for the six months ended June 30 was 89. 72 billion yuan (US$14. 5 billion), up 11 per cent from same period last year.

Bank of China said its net interest margin-the difference between its cost for funds and the interest it charges on loans, and a key measure for lender profitability-rose to 2. 27 per cent at the end of June from 2. 23 per cent a year earlier.

Bank of China said its net interest income rose 14 per cent from a year earlier to 156. 68 billion yuan and net fee and commission income rose 13 per cent to 78. 2 billion yuan.

Bank of China reported a total of 85. 86 billion yuan in nonperforming loans at the end of June, up from 73. 27 billion yuan at the beginning of the year.

The bank said it has written off and transferred out a total of 9. 36 billion yuan in bad loans during the first six months of the year, nearly five times the 2 billion yuan in such loans it shed in the same period last year.

China posted economic growth of 7. 5 per cent in the second quarter compared with a year earlier, a slowdown from 7. 7 per cent in 2013 and rates of 8 per cent or higher in the last decade.

Read more here: Business Spectator


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