Higher than expected loan growth and fee income saw Bank of China (03988.HK) beat forecasts to book a nearly 28 percent year on year hike in first-half net profit to 66.51 billion yuan (HK$81.14 billion).

Earnings per share were 24 fen and no interim dividend was declared.

This came as first-half net profit at local arm BOCHK jumped 66.8 percent (2388) to a record HK$12 billion, or HK$1.13 per share.

An interim dividend of 63 HK cents was proposed, with return on equity up 6.32 percentage points to 19.88 percent.

Net interest income at the mainland bank rose about 20 percent to 110.22 billion yuan in the six months to June 30.

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Customer loans rose 9.82 percent to 6.2 trillion yuan from the end of last year.

Non-interest income surged nearly 36 percent year on year to 55.76 billion yuan as fee and commission income gained 23.56 percent.

Capital adequacy ratio increased 0.37 percentage point to 12.95 percent, while core CAR narrowed 0.08 percentage point to 10.01 percent.

BOC president Li Lihui said the lender - the mainland's third largest by market value - will not issue new shares, but will likely issue bonds to raise fresh funds by the end of next year.

Outstanding loans to local government financing vehicles totaled 531.5 billion yuan as at June 30, Li said, adding about 90 percent is covered by cash.

Meanwhile at BOCHK, CAR and core CAR as of June 30 rose to 17.62 percent and 12.87 percent, respectively.

But net interest margin shrank 37 basis points to 1.21 percent amid low interest rates, competition for deposits and dilution impact from being the sole yuan deposit custodian in the SAR.

BOC shares dropped 2.3 percent to HK$3.01 while BOCHK fell 3.4 percent to HK$19.52 yesterday.