Rural Businesses Help Agricultural Bank of China Boost H1 Profit

Agricultural Bank of China said its pre-tax profit generated by rural businesses rose 81.9 percent from a year earlier, driven by the expansion of business scales and incremental loan-to-deposit ratio.

Agricultural Bank of China, the country’s third largest lender by assets, said Monday its pre-tax profit generated by rural businesses rose 81.9 percent from a year earlier, driven by the expansion of business scales and incremental loan-to-deposit ratio.

The outstanding loans in rural areas jumped 17.9 percent to 1.4 trillion yuan in the first six months, and realized pre-tax profit hit 14.52 billion yuan, nearly doubled that in 2009. Average earning yield in the first half relating to “San Nong” (businesses in rural areas) grew from 0.42 percent in 2009 to 0.69 percent, the lender said.

Lower capital cost and larger deposit and loan spreads in county areas are two key drivers, AgBank’s Vice-President Zhu Hongbo, who is in charge of rural businesses, told a press conference on its half-year results.

AgBank has 2,048 county-level branches and 22 sub-branches, covering basically all of China’s 2,003 counties. The rural businesses include loans provided to farmers, as well as other county-level financial services that help spur the growth of agricultural industry in these areas.

Pricing in these areas are more flexible, focusing on local market and competitive environment, Zhu added.

The bank, which raised a record $22.1 billion in an initial public offering last month, said its first-half net profit rose 40 percent from a year earlier due to robust growth in its rural financial businesses.