The Industrial and Commercial Bank of China (ICBC), the country's largest lender, posted a net profit of 33.7 billion yuan (US$4.2 billion) last year, a year-on-year increase of 12 per cent, according to its 2005 annual report released yesterday.

The bank, which is planning to float on the Hong Kong stock market later this year, said in the report that its outstanding non-performing loans (NPL) amounted to 154.4 billion yuan (US$19.3 billion) at the end of last year, or 4.69 per cent of its total lending, a sharp drop from the previous year's 16.47 per cent.

The lender's capital adequacy ratio hit 9.89 per cent and its core capital adequacy ratio reached 8.11 per cent at the end of 2005, the report showed.

"It is an upbeat annual report, which shows that the new management structure and operation process introduced by the bank during its restructuring efforts worked," said Zhang Xi, a banking analyst with China Galaxy Securities.

"All those figures show that ICBC's asset quality has improved remarkably thanks to its restructuring efforts in the past year," said Wu Yonggang, a banking analyst with Guotai Jun'an Securities.

Both analysts agree that the  report casts a positive light on ICBC's Hong Kong stock listing later this year.

"The report will definitely shed a positive light on its upcoming stock listing," Zhang said.

The report, she said, is likely to help the bank get a better pricing when it is floated.

"Although its (ICBC's) net profit is slightly lower than that of China Construction Bank, as the country's biggest bank with the most extensive network, ICBC could have a better price," the analyst said.

"The report will strengthen that argument," she added.

(For more biz stories, please visit Industry Updates)