HONG KONG: Brokerage houses have marked up their ratings on Industrial & Commercial Bank of China (ICBC), after the top mainland lender posted a higher-than-estimated first half earnings.

ICBC, the world's biggest bank by market value, is expected to benefit from the jump in net fee income and the increase in new lending on the mainland.

Beijing-based ICBC reported on Thursday that its first-half net income climbed 2.93 percent to 66.42 billion yuan, driven by lower bad-loan provisions and record credit growth.

"ICBC's better-than-expected results, coupled with improving prospects in the key areas of margins, asset quality and fees, should see the stock continuing to perform well," Warren Blight, a Hong Kong-based analyst at Fox-Pitt Kelton, said in his research note on Friday.

He also upgraded profit forecasts of ICBC by 4 percent in 2009 and 8 percent in 2010.

By the end of June, loans and advances of ICBC rose 19 percent to 5.44 trillion yuan. New lending of mainland banks soared to 7.73 trillion yuan for the first seven months this year, much above the central government's full-year target of 5 trillion yuan.

The market, however, is allowing that the growth in new lending may moderate in the coming months, as the country's loose monetary policy may be tightened to avoid a possible bubble in the equity and property markets.

The bank's net interest income in the first half fell 11.9 percent to 116 billion yuan, as the net interest margin trimmed to 2.25 percent from 2.95 percent at the end of 2008.

The net interest margin may have started to bottom out, as mainland officials curb credit growth and mainland banks charge more for loans, analysts said.

DBS Vicker raised ICBC's price target to HK$6.7 from HK$6.1, while giving a "buy" rating to the mainland lender.

Boosted by the positive outlook in new lending and fee income, JPMorgan has also raised its earning forecast for ICBC to 7 percent and 8 percent in 2009 and 2010, respectively, while giving a target price of HK$7.3 for its H-share.

Morgan Stanley, meanwhile, also upgraded ICBC's earnings estimate by 3 percent for 2009 and 2011, because of a better outlook for fee income.

(HK Edition 08/22/2009 page5)