ICBC disappoints with 1st half results

China’s largest lender reported a 12.5% net profit rise for January to June, or less than half the comparable rate in 2011, while loans overdue for less than three months jumped 60%.

Industrial & Commercial Bank of China Ltd, also the world’s largest bank by market capitalization, said its net profit rose to 12.5% to RMB123.2 billion year-on-year. In comparison, the bank’s net profit increase for January to June 2011 of RMB109.6 billion was 29% better than the comparable period in 2010.

ICBC blamed the slower profit growth on a worsening economy that is sharply curbing demand for financial services even as more borrowers defaulted on debt.

For April to June this year, the bank’s net profit increased 11% to RMB61.8 billion. ICBC’s net interest margin, a measure of lending profitability, inched upward very slightly to 2.66% in the first half from 2.6% a year earlier.

Its overdue loans for less than three months surged 60% to RMB80 billion while loans pending for more than 90 days rose 7% to RMB62 billion.

Overdue loans among China’s Big Four state jumped for the sixth straight quarter as the economy decelerated and threatens to worsen as China’s liberalization of interest rates threatens to squeeze margins further in the second half.

“Credit quality of Chinese banks has obviously deteriorated, which is a reflection of the significant decline in the economy,” said Lewis Wan, the Hong Kong-based chief investment officer at Pride Investment Group Ltd.

Soured loans in China’s 3,800 banks increased for a third straight quarter, the longest streak of deterioration in eight years, said the China Banking Regulatory Commission, the banking sector regulator.

Overdue loans, an indication of future bad loan formation, at China’s five biggest banks hit RMB416 billion as of June 30, an increase of 27% from December 2011.