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Chinese bank profits despite crisis

Chinese bank profits despite crisis

(15 April 2008 – China) China Construction Bank has recorded a 51 percent jump in second half earnings despite losses from US sub-prime holdings. The bank earned second-half net profit of 34.83 billion yuan (US$4.97 billion) compared with 23 billion yuan in the second half of 2006.

China Construction Bank's overall provisions rose by 44 percent as it booked a US$630 million impairment loss for 2007 on its holdings of US sub-prime mortgage backed securities.

The bank, the second largest lender in China by assets, met market expectations with the 51 percent rise due to higher fee income and margins.

Net interest margins improved for the bank and are expected to keep increasing due to stronger pricing power for banks as loan quotas become scarce resources due to Beijing's curbs to lending growth.

Zhu Xiaohuang, the bank's chief risk officer said that they have a policy to increase loan quality, such as being more selective in choosing clients in the property sector.

Construction Bank's loans outstanding rose 13.9 percent to 3.18 trillion yuan in the year, and bank Chairman Guo Shuqing said loans should grow at the same rate this coming year.
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