(Updates with comment from analyst in fourth paragraph.)
Oct. 26 (Bloomberg) -- Agricultural Bank of China Ltd., the nation’s largest lender by number of branches, said third- quarter profit rose 40 percent as loans and fee income climbed.
Net income rose to 34.1 billion yuan ($5.4 billion) from 24.3 billion yuan a year earlier, the Beijing-based lender said in a statement to the Hong Kong Stock Exchange today. That was in line with the 33.9 billion-yuan median estimate of eight analysts surveyed by Bloomberg News.
Agricultural Bank, which sold shares in an initial public offering in July 2010, said net interest income jumped 26 percent as the lender tapped demand for financial services in the world’s fastest-growing major economy. The stock has shed 15 percent this year on concern that defaults may rise as economic growth slows and the lender may need to raise funds.
“Agricultural Bank’s profit growth is pretty good, but its capital strength is relatively low in comparison to the other big banks,” James Liu, a Hong Kong-based analyst at CIMB-GK Securities Research, said by phone. “Given the fact that bad loans are set to increase, we are concerned about its capital strength. The pressure on Agricultural Bank to raise funds is much higher than its major rivals.”
Agricultural Bank was the first Chinese commercial lender established during Communist rule. Led by Chairman Xiang Junbo, the bank had 23,468 domestic outlets at the end of June, more than any other Chinese rival.
Net interest income, or revenue from lending minus payments to depositors, rose to 78.6 billion yuan from 62.3 billion yuan a year earlier, while fee income from products including credit cards rose 53 percent to 17.7 billion yuan.
The net interest margin, a measure of lending profitability, stood at 2.8 percent, the bank said in today’s statement.
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