China Construction Bank (CCB) yesterday reported a 1.7 percent decline in net profit last year as its tax break lapsed.

The bank said its net profit in 2006 was 46.3 billion yuan, or 0.21 yuan per share, compared with 47.1 billion yuan, or 0.24 yuan per share in 2005.

But factoring out the impact of a tax break in 2005, adjusted net profit rose by 18 percent. The bank enjoyed a tax cut of 7.8 billion yuan given to it in 2005 for its restructuring and preparation for the Hong Kong initial public offering (IPO) that year.

"The result meets market expectations. Its adjusted net profit growth, along with growth in interest income, is satisfactory," said Louise Wong, director of Hong Kong-based Phillip Asset Management.

The bank's net interest income rose 20.4 percent to 140.4 billion yuan last year.

"We maintained the advantage in our traditional wholesale business including infrastructure loans and also developed new businesses such as investment banking, SME financing, trust and retail," said bank chairman Guo Shuqing yesterday.

The bank's infrastructure loans increased 29 percent last year. Outstanding personal loans including mortgage loans stood at 585 billion yuan by the end of last year, up 28.9 percent over a year ago, the highest among the country's commercial banks.

"Its fee income, which jumped as much as 60 percent, is quite high among its peers," said Wong from Phillip Asset Management.

Earlier, Bank of China had reported a 12.07 percent growth in non-interest income and the Industrial and Commercial Bank of China reported a growth of 55 percent.

CCB's fee and commission income, 13.57 billion yuan in 2006, accounted for 8.95 percent of its total income, 2.38 percentage points higher than a year ago.

"However, its foreign exchange business saw losses last year and its impaired loan hasn't shown any improvement," Wong said.

"But all in all, the bank remains one of our preferred long-term Chinese banks given its proximity to China's robust growth. I think the bank has a very dynamic management team."

CCB also announced yesterday that it will further cooperate with its strategic partner, Bank of America which holds an 8.5 percent stake in it in the credit card business.

The two will first establish an independent credit card business unit soon. They will then set up a credit card joint venture when relevant legal and regulatory permission is obtained.

Under a memorandum of understanding signed last week, CCB will hold a 63 percent stake in the joint venture and Bank of America the rest, with both parties' stakes subject to a lock-up period of no less than three years.

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