SHANGHAI/HONG KONG (Reuters) – China Construction Bank (CCB) (0939.HK) (601939.SS), posted a 20 percent rise in second-quarter profit as the world's second-biggest lender by market value seeks to raise $11 billion to fuel growth restrained by a weak capital base.
Profit growth at CCB, China's biggest lender to home buyers and construction projects, beats analyst expectations, but slowed from last quarter's 34 percent pace, foreshadowing the challenges Chinese banks will face in the second half.
"On the one hand ... the environment for comprehensive operations will loosen, providing excellent opportunities for nurturing new types of businesses," CCB, which is 11 percent owned by Bank of America (BAC.N), said in a statement to the Hong Kong Stock Exchange.
"On the other hand, given the tight market liquidity and volatile capital market, deposit expansion will be more difficult, and the pressures from regulation monitoring and peer competition set higher demand for management capabilities."
China has stepped up efforts in recent months to curb property and infrastructure lending, conducted stress tests on mortgage loans and increased scrutiny over banks' loan books, triggering investor concerns over banks' asset quality after a lending binge last year.
CCB earned a net profit of 35.6 billion yuan ($ 5.24 billion) during the April-June period, compared with 29.6 billion yuan a year earlier.
The results beat the expectations of seven analysts polled by Reuters, who forecast on average that CCB's quarterly profit would rise 16 percent to 34.3 billion yuan.
In the first half, CCB's profit rose 27 percent. That compares with a 60 percent jump at China Merchants Bank (3968.HK) (600036.SS) and a doubling in earnings at newly-listed Everbright Bank (601818.SS).
CCB shares fell 0.15 percent in Hong Kong on Friday before earnings were released. The stock has dropped 1.95 percent this year, compared with a 4 percent fall in the benchmark Hang Seng Index (.HSI).
In the same period, CCB's Shanghai-listed shares have fallen 22.5 percent.
CCB plans to sell 75 billion yuan ($11.1 billion) worth of shares in Shanghai and Hong Kong as early as the fourth quarter to replenish capital, sources with direct knowledge of the fundraising scheme told Reuters this month.
The lender's capital adequacy ratio -- a key measure of banks' financial strength -- stood at 11.68 percent as of June 30. That compares with the 11.5 percent minimum required for listed state lenders.
Analysts caution banks face increasing uncertainties, including risks of rising bad loans following last year's 9.6 trillion yuan government-backed lending spree, a slowing recovery in interest margins and a tightening regulatory environment.
Major Chinese banks, including Industrial and Commercial Bank of China (1398.HK) (601398.SS) and Bank of China (1398.HK) (601398.SS) have also announced plans to raise billions of dollars in the coming months to strengthen balance sheets.
(Reporting by Samuel Shen and Alison Leung; Editing by Lincoln Feast and Jon Loades-Carter)