Chongqing bank profit misses market target

Earnings growth at Chongqing Rural Commercial Bank slowed to 15 per cent in the first quarter as net interest margin narrowed and provisions for bad loans surged.

The first mainland lender to release interim results in Hong Kong, the Chongqing bank yesterday said net earnings totalled 1.6 billion yuan (HK$2 billion) in the January-March period, compared with 1.4 billion yuan a year ago.

The year-on-year 15 per cent increase in net profit fell short of the 17 per cent forecast by many analysts and was much slower than the 26.5 per cent profit jump for the whole of last year.

Hong Kong-listed mainland banks are expected to post a sharp slowdown in net earnings for the first quarter, from the average 24 per cent seen a year ago. Analysts estimate profits will grow between 7 and 11 per cent.

"China bank shares could rise on good earnings, but I'm cautious, partly because of the likelihood of interest rate deregulation in the second half of this year," said May Yan, an analyst at Barclays Capital.

Most mainland lenders fell in Hong Kong trading yesterday, but shares in the Chongqing bank rose 1.47 per cent in anticipation of the results, to close at HK$4.15.

Net interest margin, a key measure of lending profitability, shrank to 3.31 per cent in the first quarter from 3.59 per cent in the year-ago period, as a result of two interest rate cuts by the central bank last year, the lender said.