Industrial and Commercial Bank of China (ICBC), the country's largest lender by assets, said yesterday that its net profits vaulted 57 percent to 64.5 billion yuan in the first half, overtaking Europe's largest lender HSBC - the world's most profitable bank.

The Beijing-based bank's net earnings for the six months ended June 30 rose 57 percent from 41.04 billion yuan a year earlier, higher than the $7.72 billion earned by HSBC. Its earnings per share soared to 0.19 yuan.

Analysts said ICBC's domestic-focused business helped it shun the US subprime crisis that has led to more than $500 billion of writedowns and losses at financial institutions worldwide.

The bank said its first-half net interest income rose 29 percent to 131.79 billion yuan from 102.21 billion yuan in the corresponding period last year, while its net fee and commission income rose 48 percent to 24.48 billion yuan from 16.54 billion yuan.

The lender's net interest margin, a measure of lending profitability, climbed to over 3 percent from 2.8 percent last year.

"There's still the second half and we will continue to work hard," Jiang Jianqing, chairman of ICBC, said yesterday. "We're confident to be the most profitable for the full year but we'll have to wait till the end to see who gets the gold medal."

Jiang also expects ICBC to become the most profitable lender after three years.

ICBC's outstanding loans totaled 4.36 trillion yuan at the end of June, up 7 percent from 4.07 trillion yuan at the end of last year. The bank's deposit rose 9 percent to 7.54 trillion yuan.

Its non-performing loan ratio was 2.41 percent, down from 2.51 percent at the end of March, while capital adequacy ratio rose to 12.46 percent from 11.92 percent over the same period.

Jiang said China's new corporate income-tax rate, which fell to 25 percent from 33 percent and took effect early this year, also helped lift the lender's earnings. The bank also said it held bonds related to Fannie Mae and Freddie Mac, the troubled US mortgage agencies, totalling $2.7 billion, or about 0.2 per cent of its total assets.

ICBC overtook Citigroup last year as the world's largest bank by market value.

The lender's Hong Kong-traded shares have fallen 6.6 percent this year, compared with a nearly 25 per cent drop in the benchmark Hang Seng Index.

ICBC is the best player in the Hang Seng Finance Index in the fist half.

Its Shanghai-traded shares have fallen 41 percent during the period. Shares in ICBC dropped 2.1 percent to close at HK$5.12 yesterday in Hong Kong.

(HK Edition 08/22/2008 page2)