The Bank of Communications said yesterday its first-half profit surged 81 percent, a growth its chairman described as a peak.

Net income climbed to 15.5 billion yuan (US$2.3 billion), or 0.32 yuan a share, from 8.6 billion yuan, or 0.18 yuan, a year earlier, the Shanghai-based company said yesterday. The figures are based on international accounting standards.

"The profit growth marked the peak," said Jiang Chaoliang, chairman of the Shanghai-based bank. He expected slower and more sustainable growth in the future.

Jiang quoted the widening interest spread, China's stable economic growth, tax rate cut, the bank's rising fee-based income and a drop in costs as main profit drivers for the high growth. But he cautioned there is limited room for the bank to generate higher profit, wider interest spread and more cuts in costs in the future, adding that the tax reduction was a one-off occurrence.

China cut its corporate income tax rate on domestic companies from 33 percent to 25 percent earlier this year.

BoCom's net interest margin gained to 3.08 percent in the first half from last year's 2.79 percent.

The People's Bank of China, the central bank, raised interest rates six times last year, leaving commercial banks with larger margins.

BoCom's interest income soared 40.62 percent to 33.1 billion yuan while fees and commissions jumped 50.5 percent to 4.65 billion yuan.

The bank sold US$27 million in bonds last month that were issued by Fannie Mae and Freddie Mac but incurred no losses on the sales, said Yu Yali, executive vice president and chief finance officer. The bank's bad loan ratio dropped to 1.83 percent at the end of June, down from 2.05 percent at the end of 2007. If it were not for rising bad loans due to the May 12 Sichuan earthquake, the ratio could have fallen to 1.73 percent, the bank said.

The bank plans to set up credit card and pension fund joint ventures with HSBC, 19 percent owner of BoCom.

"We are in the process of setting up the pension venture with HSBC. There will be only two shareholders in the venture, BoCom and HSBC," Jiang told reporters.

The credit card joint venture will be set up this year, with HSBC holding about 20 percent, he said.

(Shanghai Daily August 27, 2008)