BoCom Profit Beats Estimates as Bank’s Fee Income Increases

Bank of Communications Co., the Chinese lender part-owned by HSBC Holdings Plc, reported a higher-than-estimated 13 percent increase in second-quarter profit as fee income surged.

Net income climbed to 17.1 billion yuan ($2.8 billion) from 15.2 billion yuan a year earlier, based on figures announced by the Shanghai-based lender known as BoCom. That exceeded the 16.6 billion-yuan median estimate of 10 analysts surveyed by Bloomberg News.

BoCom, the nation’s fifth-largest lender by market value, bucked the trend of a slowdown in profit growth at smaller rivals Shanghai Pudong Development Bank Co. and Industrial Bank Co. BoCom’s fee income from selling services such as wealth management products, credit cards and insurance jumped 30 percent to 7 billion yuan.

“Profits at BoCom grew more than expected as its lending margin wasn’t squeezed as much as other banks which have reported earnings,” Rainy Yuan, a Shanghai-based analyst at Masterlink Securities Corp., said by phone. “Fee income also showed a strong increase.”

BoCom’s net interest income rose 11 percent to 33 billion yuan in the second quarter, helping net income growth outpace its 12 percent expansion in the three months to March.

Profit growth is easing at some Chinese banks as loan demand slows in an economy forecast by analysts in a Bloomberg survey to grow 7.5 percent this year, almost half 2007’s 14.2 percent pace.

‘Further Deceleration’

Hong Kong-listed Chinese banks may report average second-quarter profit growth of 8 percent, down from 11.5 percent in the first three months, Sanjay Jain, a Credit Suisse analyst, forecast in a note on July 30. There is “potential for further deceleration” of profit in the second half of the year, according to the note.

Industrial Bank’s second-quarter net income increased 21 percent from a year earlier, slower than a 32 percent expansion in the first quarter, data compiled by Bloomberg show. Shanghai Pudong Development Bank Co.’s profit growth declined to 12.7 percent in the second quarter from 12.8 percent in the January-to-March period.

Bocom’s full-year earnings may increase by 5 percent, a third of the growth rate in 2012, according to the average of analyst estimates in a Bloomberg survey.

The lender had 3.2 trillion yuan of loans at the end of June, an increase of 8.6 percent from the beginning of the year. Non-performing loans rose to 31.7 billion yuan as of June 30, compared with 30.74 billion yuan in March.

In the first half, BoCom’s profit rose 12 percent to 34.8 billion yuan, according to today’s statement. The bank’s net interest margin, an indicator of lending profitability, contracted 5 basis points to 2.56 percent after the central bank cut benchmark interest rates twice in 2012.

Shares of BoCom, which closed unchanged today, have lost 9.9 percent in Hong Kong this year. That compared with a 3.7 percent decline in Hong Kong’s benchmark Hang Seng Index.

— With assistance by Jun Luo

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