Bank of China says 3Q net profit up 11.5 pct

Wed Oct 29, 2008 7:15 AM EDT

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SHANGHAI — Bank of China, one of China's biggest state-owned commercial lenders, said Wednesday that its net profit rose 11.5 percent in the July-September quarter, as trading gains and interest income helped offset weakness in other areas.

The bank's 17.62 billion yuan ($2.6 billion) in net profit for the third quarter compared with a 15.9 billion yuan profit a year earlier.

But the increase represented a sharp slowing from the 43 percent increase in profit the bank, China's third-largest commercial lender by assets, reported for the first half of the year.

Profit for the first nine months of the year rose 32 percent over a year earlier to 59.9 billion yuan ($8.8 billion).

The bank said that as of Sept. 30, it held $3.27 billion worth of U.S. subprime mortgage-related debt. But that accounted for only 1.43 percent of its total securities investments. Holdings of debt securities issued or backed by U.S. mortgage giants Freddie Mac and Fannie Mae were worth $9.95 billion, it said.

Impairment losses on loans, advances and securities for January-September totaled 26.3 billion yuan ($3.85 billion), it said.

Bank of China's traditional role in trade financing makes it relatively vulnerable to slowing growth in foreign trade slowing due to the global credit crunch.

Its 40.7 billion yuan ($6 billion) in interest income in July-September was a 3 percent increase over the 39.5 billion yuan it earned in interest in third-quarter 2007.

Net fee and commission income rose only modestly, to 9.48 billion yuan ($1.4 billion) in the third quarter, from 9.37 billion yuan a year earlier.

The bank reported net trading gains of 2.8 billion yuan ($408 million), against 2.4 billion yuan in trading losses a year earlier. Those came from favorable revaluation of its foreign currency position and a reduction in the cost of foreign exchange derivative dealings, the bank said.