By Kennix Chim
HONG KONG (Reuters) - Industrial and Commercial Bank of China , the world's biggest bank by market value, posted a 77 percent jump in first-quarter profit on Tuesday and booked a further $58 million worth of provisions for its exposure to the U.S. subprime mess.
ICBC, in which Goldman Sachs (GS), Allianz Group (ALVG) and American Express (AXP) hold stakes, reported January-March earnings of 33.1 billion yuan (US$4.7 billion), compared with 18.7 billion yuan a year earlier, thanks to higher interest and fee income as China's economy continued to surge.
Macquarie had estimated the bank would post 29.8 billion yuan in net profit in the first quarter.
After a strong first quarter and a bumper 2007 for Chinese banks, analysts expect lenders to have a harder time for the remainder of the year as customers shift to time deposits and away from more profitable demand deposits as a weak stock market dents enthusiasm for share investing.
Asset quality at mainland lenders, meanwhile, is expected by observers to deteriorate in the second half, as property firms are hit by Beijing's clampdown on borrowing and exporters are squeezed by a weakening U.S. economy.
"It will be difficult for banks to maintain their high growth rate for the rest of the year, as wealth management and margin expansion have been surging since the second quarter of last year," said Simon Ho, analyst at ABN Amro.
ICBC said the face value of its U.S. subprime mortgage-backed securities was $1.2 billion at the end of March, and it booked an impairment provision of $48 million on top of the $400 million in provisions made in 2007.
ICBC also said it held structured investment vehicles (SIVs) with face value of $55 million and made $10 million in impairment provisions for them in the first quarter. It booked $35 million for SIV provisions in 2007.
"The hard times for Chinese banks hit by the U.S. subprime problems have passed, as financial markets have stabilized. Those banks may make further slight provisions during the rest of the year, but the amounts are very small in terms of their total profit," said Samuel Chen, an analyst at JP Morgan.
Rival Bank of China < hs been hardest-hit among Chinese lenders by its exposure to subprime holdings.
Also on Tuesday, No. 5 Chinese lender Bank of Communications , which is about 19 percent-owned by HSBC Holdings Plc (HSBA), said it earned 7.9 billion yuan ($1.13 billion) in the first quarter, more than double the 3.8 billion yuan it earned in the year-ago period.
INTEREST INCOME
ICBC's net interest income, which is derived from lending operations, surged 36 percent year-on-year in the first quarter to 66.3 billion yuan, while net fee and commission income jumped 86 percent to about 12.1 billion yuan.
ICBC said its non-performing loan (NPL) ratio edged down to 2.51 percent at the end of the first quarter from 2.74 percent at the end of 2007.
Net loans and advances rose by 4.5 percent from the end of 2007 to 4.13 trillion yuan.
ICBC's Hong Kong shares have risen 10 percent so far this year, outperforming a nearly 7 percent fall in the benchmark Hang Seng Index . Its Shanghai-listed shares have fallen 20 percent.
(US$1=HK$7.8=6.9864 yuan)
(Reporting by Kennix Chim; Editing by Louise Heavens & Anne Marie Roantree)
