ICBC Redux

Yesterday, I talked about ICBC (#01398). The bank has just announced that net profits for the first half of 2008 will be up at least 50%! This is in spite of the tightening of credit on the Mainland.

Profits were up over 77% for 2008Q1, and margins have been under some pressure in the second quarter. In 2007 first half profits were up over 60%. Overall, we should see the effects of tightening measures in the second half as investors move to longer term deposits increasing funding costs for banks. However, we expect fees and other non interest income to rise. Banks in China do not have the wide range of financial products that we are used to seeing, and the potential for increased profitability from these products will be substantial. We still maintain a strong BUY recommendation.