ICBC Q3 profit up 27% on loan growth, margins

ICBC Q3 profit up 27% on loan growth, margins

Shanghai: Industrial and Commercial Bank of China (ICBC), the world’s most valuable lender, said its third-quarter earnings rose 27% on strong lending and improving margins, as fears of ballooning bad loans after a 2009 lending binge receded.

The Beijing-based lender also said on Thursday that it will pay $180 million to buy control of French insurer AXA’s Chinese joint venture, expanding into the country’s fast-growing life insurance market.

ICBC’s strong results, which are in line with analysts’ forecasts, bodes well for the lender’s planned $6.6 billion rights issue, and help lift investor sentiment towards a sector weighed down by concerns of asset quality.

Rivals Agricultural Bank of China and Bank of China both posted better-than-expected quarterly profits on Wednesday.

ICBC, in which Goldman Sachs owns about a 3% stake, said net profit rose to 42.61 billion yuan ($6.4 billion) during July-September, compared with 33.6 billion yuan a year earlier.

The results were roughly in line with expectations of five analysts surveyed by Reuters, who forecast a 32 percent rise in quarterly earnings to 44.2 billion yuan.

China’s economy expanded 9.8% in the third quarter, helping drive loan demand, support asset prices and reduce default risks after last year’s government-directed lending binge aimed at aiding recovery.

Efforts to rein in liquidity this year following the lending boom -- including a surprise interest rate hike last week -- are helping improve banks’ lending profitability, analysts said.

Chinese banking shares rebounded sharply this month, as fears of rising bad loans fade, and as lenders’ low valuations attract investors seeking bargains in a bullish stock market.

ICBC shares in Hong Kong have rallied 8% in October on improving sentiment, after languishing for most of the year amid concerns about ballooning bad loans. Shares closed up 0.7% on Thursday before its results were announced.

ICBC, which owns 16,210 nationwide outlets, also said on Thursday that it would buy a 60 percent stake in Shanghai-based AXA-Minmetals Assurance.

Chinese banks are rushing into the country’s fast-growing life insurance industry after a nearly two-decade ban, hoping to leverage their vast sales networks to gain market share from dominant players such as China Life and Ping An.

ICBC and its main state-owned rivals Bank of China and China Construction Bank are expected to sell shares publicly by the end of this year, as Chinese lenders near the end of a fundraising rush to replenish capital depleted by last year’s record lending.

ICBC plans to raise up to 45 billion yuan ($6.6 billion) through a rights issue in Hong Kong and Shanghai.