China Minsheng Bank 600016.SH, China’s first non-state owned lender, reported a 57 percent jump in first half net profit driven by improving net interest margin, cost efficiency and surging non-interest income.
 
The bank recorded operating income of 38.801 billion renminbi in the first half of 2011, up 48.8 percent from a year ago. Net profit attributable to equity holders rose 46.98 percent to 13.918 billion renminbi. Net interest income was up 40 percent to 29.5 billion renminbi due to improved net interest margin and an increase in interest-bearing assets. Net interest margin posted a minimal increase by 0.08 percentage point to three percent, while net interest spread rose 0.05 percentage point to 2.85 percent.
 
Non-interest income jumped 88 percent to 9.256 billion renminbi, boosted by a growth in custodian and credit card businesses. Net fee and commission income to income ratio has increased 3.12 percentage points to 20.41percent. The bank has become more profitable as return on average shareholder’s equity has gone up 3.05 percentage points to 12.69 percent and cost to income ratio dropped 5.75 percentage points to 34.08 percent.
 
The bank’s impaired loan ratio dropped 0.06 percentage point to 0.63 percent, while allowance to impaired loan ratio surged 63.85 percentage points to 334.3 percent. Capital adequacy ratio (CAR) went up 0.32 percentage point to 10.73 percent from end-2010 after issuing 10 billion renminbi of subordinated bonds in the domestic market. However, core CAR dropped 0.32 percentage point to 7.75 percent.
 

Since October, Beijing has raised interest rates five times and banks' required reserve ratio nine times to tighten domestic liquidity. The interest rate hike is expected to boost Chinese banks’ net interest margin but the tightening environment has created concern on banks’ abilities to meet capital requirements.