ICBC earnings grow as bank buys insurer

City A.M. Reporter
Industrial and Commercial Bank of China (ICBC), the world’s most valuable lender, joined rivals in posting robust earnings on strong loans growth, giving a boost to its planned multi-billion dollar fundraising.

The Beijing-based lender also said it will pay $180m (£112.8m) to buy control of French insurer AXA’s Chinese joint venture, expanding into the country’s fast-growing, $100bn life insurance market seeking to challenge such established giants as China Life.

The move is part of a broader industry trend by China’s financial services firms to expand into each others’ businesses as they seek new revenues and try to become more diversified.

ICBC’s 27 per cent jump in third-quarter earnings, which were in line with market forecasts, bode well for the lender’s planned $6.6bn rights issue, and could help further lift investor sentiment towards a sector recovering from concerns over asset quality. Rivals Agricultural Bank of China and Bank of China both posted better-than-expected quarterly profits on Wednesday. ICBC, in which Goldman Sachs owns about a three per cent stake, said net profit rose to 42.61bn yuan (£4bn) during July to September from 33.6bn yuan a year earlier. Five analysts surveyed by Reuters forecast a 44.2bn yuan profit.

China’s economy expanded 9.8 per cent in the third quarter, helping drive loan demand, support asset prices and reduce default risks after last year’s government-directed lending binge aimed at aiding recovery.

ICBC’s third-quarter net interest income of 221.7bn yuan was up 24.4 per cent over the same period. Its non-performing loans ratio fell 39 percentage points over the first nine months of 2010 to 1.15 per cent at the end of September.