Aug. 15 (Bloomberg) -- Shenzhen Development Bank Co., the best performer this year among China's publicly traded banks, said first-half profit more than doubled on higher loan margins and new products. Net income climbed to 1.12 billion yuan ($148 million), or 0.54 yuan a share, from 463.6 million yuan, or 0.24 yuan a share a year earlier, the bank said in an e-mailed statement today.

Shenzhen Development's lending expanded 18 percent in the first half from a year earlier, as China's economic growth accelerated to 11.9 percent in the second quarter, fueling loan demand. The bank's shareholders also removed constraints on growth in June by approving a plan to make all its stock tradable, lifting a financing hurdle.

``The numbers are impressive, but they are not a surprise as all banks fare well in a booming economy,'' said Qiu Zhicheng, a Shanghai-based bank analyst at Haitong Securities Co. ``It remains to be seen how resilient they are in dealing with a downturn.''

Shenzhen Development, controlled by buyout firm Newbridge Capital LLC, increased profit with new mortgage, foreign- exchange, wealth management and trade-finance products. It also benefited from the central bank's raising lending rates three times this year while boosting the demand deposit rate only once, making loans more profitable for banks.

Interest, Fee Income

Net interest income at Shenzhen Development Bank, based in the southern Chinese city of the same name, rose 42 percent while fee income increased 51 percent, the statement said.

Loans to individuals, mainly mortgages, jumped 82 percent in the first half from a year earlier. Deposits gained 26 percent.

The bank's bad-loan ratio stood at 7 percent, down from 7.98 percent at the end of last year and 11.4 percent when Chairman Frank Newman took the post in May 2005. Shenzhen Development recovered 1 billion yuan of non-performing loans in the first half.

Under Newman's leadership, Shenzhen Development has also repaired its credit oversight system and beefed up financial strength. The stock has gained 167 percent this year, as it improved asset quality and earnings.

The bank's shares have risen too far, Qiu said. Shenzhen Development trades at 42 times estimated profit in 2007, compared with 38 times for China Minsheng Banking Corp. and 39 for Industrial Bank Co., according to data compiled by Bloomberg.

Raising Capital

The bank's capital adequacy ratio, a measure of financial strength, climbed to 3.88 percent as of June 30 from 3.7 percent as at the end of 2006, falling short of the government-mandated 8 percent.

Shenzhen Development wasn't allowed to sell bonds or shares to resolve its capital shortage before satisfying a government order that all public companies make all their non-trading stock tradable. The bank said in June it will raise 16 billion yuan selling bonds for the first time and the move will boost its capital ratio to above 8 percent.

San Francisco-based Newbridge Capital bought 17.9 percent of Shenzhen Development in May 2004. The holding was diluted in October 2005 when the bank sold $100 million of new shares -- equal to a 7 percent stake -- to General Electric Co., making the Fairfield, Connecticut-based company its second-largest investor. The transaction awaits regulatory approval.

To contact the reporter on this story: Luo Jun in Shanghai at at jluo6@bloomberg.net

Last Updated: August 15, 2007 06:31 EDT