(Shanghai Daily)
Updated: 2007-07-11 09:21

Two major Chinese banks forecast a huge growth in profit for the first half of this year, bolstered by an expanding loan business and other fee-based income.

Analysts said other lenders may follow by charting rosy gains during the period, boosting the banking sector's attractiveness for stock investors in China.

China Merchants Bank Co Ltd, the seventh-biggest lender on the mainland, said first-half net profit will probably more than double from the 2.8 billion yuan (US$369.3 million) a year earlier on rapidly-expanding core businesses, including loans and interest income.

The lender posted the biggest profit rise among mainland-listed banks last year, with an 81-percent year-on-year expansion.

Meanwhile, Industrial and Commercial Bank of China, the country's top lender, said it expects net income to climb more than 50 percent from 25.14 billion yuan a year earlier due to a boost in lending and non-interest income. Net profit posted a 30.2-percent gain last year.

Both banks said their first-half profit estimates were based on unaudited figures. They will release audited results next month.

Analysts maintained their "buying" rating on the banks on expectation that Chinese lenders will continue to see perform strongly this year as the economy booms.

"Lenders such as Merchants Bank are still worth buying taking into account their robust profit gains," said Wu Yonggang, an analyst at Guotai Jun'an Securities Co. "We expect the bottom line to stay strong as rising fee-based income becomes the major growth catalyst."

Chinese banks are providing loans and expanding fee-based income such as selling wealth management products and mutual funds to bolster profits.

The banking sector, comprising heavily-weighted lenders, has stayed as the major driver of the benchmark Shanghai and Shenzhen indexes since last year.

China's loan growth climbed by an average of 14.5 percent each year over the past five years. Total loans growth stood at 16 percent year on year in May, unchanged from that in April.

Analysts said possible interest rises and other tighter measures in the second half may to some extent dampen the growth of loans income.