Hong Kong: China Construction Bank Corp (CCB) , China’s largest mortgage lender, posted an 18.6% rise in quarterly net profit on Sunday, and said China’s development and adjustments to its economy would pose opportunities for the bank to revise its lending practices.
CCB’s Hong Kong-listed shares fell by as much as 2.9% in morning trade on Monday after the bank said it took the impairment on securities and off-balance sheet items.
China’s series of curbs on the booming real estate sector weighed on CCB’s earnings, though an improvement in interest margins due to a monetary tightening campaign by the central bank helped boost the lender’s results.
“The environment for comprehensive operations will loosen, providing excellent opportunities for nurturing new businesses,” CCB noted in a filing with the Hong Kong stock exchange. “The accelerated liberalization of interest rates and exchange rates will also give the group greater freedom for financial innovation.”
However, the expansion of its liability business is becoming more difficult amid tightening liquidity and the fluctuating capital market, CCB said.
The People’s Bank of China has raised interest rates three times and bank reserve requirements six times since October, most recently on 18 March, to rein in inflation and mop up excess liquidity.
Rate rises typically boost profitability of banks by improving their net interest margins.
CCB, in which the Bank of America Corp and Singapore’s Temasek hold stakes, recorded fourth quarter profit of 24.53 billion yuan ($3.74 billion), according to Reuters’ calculation based on full-year figures.
That was lower than a consensus forecast of 27.4 billion yuan but up from 20.68 billion yuan a year earlier.
CCB, which ranks behind Industrial and Commercial Bank of China, saw its full-year net profit grow to 135.03 billion yuan, in line with the 137.9 billion yuan mean forecast of 23 analysts from Thomson Reuters I/B/E/S.
In 2009, CCB posted a net profit of 106.8 billion yuan.
Net interest margin was at 2.49% for 2010, against 2.41% in 2009, due to a rise in interest rates. Its non-performing loan ratio was at 1.14% compared with 1.50% in a year-ago period.
The core capital adequacy ratio was at 10.4% against 9.31% in 2009.
CCB’s shares ended 1.95% higher on Friday, compared with the Hang Seng’s 1.06% climb.