(August 16, 2012, New York) It was reported by Bloomberg that the Bank of China Ltd., the nation's third-largest lender by assets, posted the slowest quarterly profit growth in three years as loan demand weakened and lower interest rates squeezed margins.
Net income climbed 5.3 percent to 34.8 billion yuan ($5.5 billion) in the three months ended June 30, from 33.1 billion yuan a year earlier, based on figures published by the Beijing- based lender yesterday. That was in line with the 34.3 billion- yuan average estimate of 17 analysts surveyed by Bloomberg. The stock fell 1.3 percent to HK$2.95 as of 9:32 a.m. in Hong Kong.
Bank of China bolstered first-half earnings by setting aside fewer provisions for bad debt, as the first cut in benchmark interest rates since 2008 eroded profitability of lending operations. China's biggest banks are trading at close to record-low valuations in Hong Kong on concern bad loans will increase as the economy slows.
"After two rate cuts, net interest margins will definitely narrow in the second half," said Timothy Li, an analyst at Core Pacific-Yamaichi International Hong Kong Ltd. "That's the utmost concern."
Bank of China advanced 411 billion yuan of new loans in the first half, compared with 556 billion yuan during the same period last year. Non-performing loans, or those overdue for at least three months, rose to 63.6 billion yuan at the end of June from 63.3 billion yuan at the beginning of the year.
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- Internationalization of the Renminbi
- Post- crisis relationship between US and China
- The Euro Debt Crisis and How it will Affect the Chinese Economy
- China's Investments in Europe: To Save or Not to Save the Euro?
- What steps China will need to perform in order to maintain its growth and success?
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