Citic shares surge on profit forecast

By Zhang Fengming  |   2008-7-7  |     ONLINE EDITION

SHARES of Citic Bank surged today after it forecast profit would more than double in the first half.

Beijing-based Citic Bank rose 7.27 percent to 5.61 yuan. The benchmark Shanghai Composite Index rose 4.59 percent to 2792.54.

Citic Bank said today it expects first-half profit to soar 150 percent year on year. The bank's profits in the first half of last year were 3.21 billion yuan.

Citic Bank said its bad loan ratio was less than 1.45 percent with provisions against non-performing loans topping more than 115 percent.

Listed companies have to make a profit forecast if they expect profits to more than double.

Citic Bank is the latest bank to forecast a growth in profit. Effective tax cuts and widening interest spreads are propelling income growth at banks this year.

Merchants Bank said at the weekend it expects first-half net profit to at least double year on year. That translates into a first-half profit of at least 12.2 billion yuan, or 0.83 yuan earnings per share.

"Merchants Bank's forecast is within our expectations," said Zhu Yan, a Citic Securities analyst, in a report today. "The widening interest spread, the cut on credit costs and the cut on corporate income taxes are the three main contributors to higher profits."

Shenzhen-based Merchants Bank ended at 22.67 yuan yesterday, up 6.48 percent.

The tight monetary policy led to limited lending and helped shore up interest pricing at banks.

China unified the corporate tax rate on domestic and overseas players to 25 percent this year. Previously, domestic companies faced a nominal rate of 33 percent.

Zhu rates Merchants Bank as a "buy" and said the banking industry is "stronger than the broad market."

Last week, Industrial & Commercial Bank of China and Shanghai Pudong Development Bank also forecast profit growth for the first half.