Industrial and Commercial Bank of China (ICBC), the biggest bank in the world by market value, posted strong profit growth of 65 percent in 2007, driven by strong growth in fee income and improving margins.

The bank earned 82 billion yuan in 2007, compared with 49.4 billion yuan in 2006. Net fee and commission income jumped 110.4 percent to 34.4 billion yuan. Net interest income surged 37.3 percent to 224 billion yuan as the net interest margin improved to 2.8 percent from 2.65 percent.

ICBC held only $1.23 billion of US subprime mortgage-backed securities till the end of December, 0.1 percent of its total assets. The booked allowance of $400 million will be sufficient to cover the related losses, according to ICBC President Yang Kaisheng.

ICBC's total loans in 2007 increased 12.2 percent to 442 billion yuan, including a 10.3 percent growth in renminbi loans and 37.5 percent growth in foreign exchange loans.

"The planned amount of reminbi loans for this year will not exceed last year's 365 billion yuan," said Chairman Jiang Jianqing. "Meanwhile, foreign exchange loans will continue to grow with increasing demand due to renminbi appreciation and from trading industries."

Net fee and commission income accounted for 13.4 percent of the bank's operating income in 2007. Among business segments, wealth management rose 381 percent, custodian business was up 203 percent and e-banking jumped 85 percent.

After a bumper 2007, Chinese banks are expected to face a tougher market this year as the government imposes more curbs on lending and further steps to combat inflation. The volatile domestic stock market also threatens the fee and commission income seen last year.

"We are very confident that our strong growth this year will continue," said Yang. "ICBC will benefit from lower credit costs, corporate income tax rate and bond investment holding."

Yang said profit will increase by 10 billion yuan if ICBC's credit cost is reduced to 0.5 to 0.6 percent from last year's 0.81 percent.

The bank will add 1,000 VIP wealth management centers this year and continue to strengthen wealth management products such as annuities, gold transaction and e-banking, Jiang said. It will also balance the ratio of agent products and self-developed products.

But Jiang refused to reveal further details on the bank's merger and acquisition plans including whether it has joined the bid for Hong Kong's Wing Lung Bank and troubled US banks.

(China Daily March 26, 2008)