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Merchants Bank profit jumps 81% on tax credit

(Bloomberg)
Updated: 2007-04-17 10:14

China Merchants BankCo., the nation's seventh largest, said 2006 profit surged 81 percent, the most amongHong Kong-listed peers, on a tax deduction and fees from credit cards.

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Net income rose to 6.79 billion yuan ($879 million), or 0.53 yuan a share, from 3.75 billion yuan, or 0.31 yuan a share, a year earlier, the Shenzhen-based bank said in a statement to the Hong Kong Stock Exchange today, citing international accounting standards. That beats the average 6.1 billion yuan estimate of 20 analysts surveyed by Bloomberg.

China Merchants, without financial aid from government or any foreign strategic investors, is taking advantage of surging household incomes in the country, pioneering offerings such as dual-currency credit cards, asset management and Internet banking. Its shares are the highest-valued among Chinese banks traded in Hong Kong, having jumped 63 percent in the past six months.

"A premium bank deserves a premium valuation, if it has a better management, can generate better returns to investors and be more resilient in a downturn," Dominic Chan, a Hong Kong-based analyst at CLSA Asia-Pacific Markets, said. "In China, Merchants Bank is simply the best."

The lender also said today first-quarter profit may have surged 87 percent from a year earlier. Net income was 1.3 billion yuan, or 0.11 yuan per share, in the first quarter of 2006, based on domestic accounting standards, it said. The bank is due to release first-quarter earnings on April 27.

Merchants Bank expanded loans by 20 percent to 549.4 billion yuan in 2006 while deposits increased 22 percent to 773.8 billion yuan. Net interest income gained 30 percent to 21.5 billion yuan, while fee income rose 60 percent to 2.5 billion yuan.