BOC profit up in 43% in first half; second half uncertain

Bank of China (BOC) saw its net profit rise 43% to US$6.17 billion for the first six months of 2008, but bank President Li Lihui warned that operations will likely come under pressure in the second half of the year, the Wall Street Journal reported. BOC’s strong first-half performance was due to robust interest and noninterest business. Interest income grew 15% to US$11.9 billion while noninterest income nearly doubled to reach US$5.47 billion. The bank said it took a US$1.9 billion charge at the end of June to cover its subprime exposure, which is the largest among Asia’s financial institutions. The value of BOC’s US subprime mortgage-backed securities stood at US$5.55 billion at the end of June. As of Monday, the bank held US$7.5 billion in bonds issued by Fannie Mae and Freddie Mac, the struggling US mortgage lenders. It also had US$5.17 billion in mortgage-backed securities guaranteed by the two companies.