Nov. 13 (Bloomberg) -- Industrial & Commercial Bank of China Ltd. Chairman Jiang Jianqing said this year’s record lending won’t lead to an increase in bad debts in 2010, and predicted loan profitability among Chinese banks will improve.

New loans at China’s largest bank will double this year even as credit growth slows in the second half, Jiang told reporters at a briefing in Singapore today. Jiang also said he expects China to maintain its current monetary policy.

ICBC, the world’s most profitable bank, extended a record 1.01 trillion yuan ($146 billion) of new credit in the first nine months as it helped finance China’s $586 billion stimulus plan. The bank made 33 billion yuan of new loans in October and expects to maintain similar levels in November and December, Vice President Niu Ximing said on Nov. 5.

“ICBC has witnessed unprecedented lending growth,” Jiang said. “Very probably, ICBC’s new lending will be double the scale of that in previous years.”

He added that because the Chinese economy is recovering, Chinese banks are slowing down lending, meaning loan growth rates in the second half will be slower than in the first half.

ICBC’s net interest margin narrowed to 2.84 percent at the end of June from 3.42 percent six months earlier. The ratio fell to 2.61 percent from 3.03 percent at Bank of China, while China Construction reported a decline to 3.38 percent from 3.88 percent.

ICBC, Bank of China Ltd. and China Construction Bank Corp., the nation’s three largest banks, last month reported third- quarter profit that beat analysts’ estimates, buoyed by the loan surge and lower provisions for potential losses on loans and investments.

Property Concern

Asset quality has improved at all three banks this year, leading to less soured debt and provision charges. ICBC’s bad loans declined to 93.5 billion yuan as of September, accounting for 1.68 percent of total advances. The ratio fell to 1.63 percent at Bank of China and 1.57 percent at Construction Bank.

The country’s credit surge and inflows of cash from investors betting that the yuan will appreciate threaten to create stock and property bubbles. The China Banking Regulatory Commission will review debt levels at some developers on concern that borrowings are fueling excessive gains in property prices, a person familiar with the matter said this month.

“It is true that prices have been picking up in both the property market and the capital markets in China,” Jiang said. “Because we are just moving out of the very deep global economic recession, the prices are picking up, we find over this period of time cannot be defined as a bubble building.”

Jiang said China should be “very careful whether the further price development will lead to global inflation.”

“But at this moment we cannot say inflation has already come,” he added.

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Last Updated: November 12, 2009 23:29 EST