With a margin of profit on the loans of 2

still need to wait to see the Chinese banks turn into paper tigers: Despite fears weighing on the real estate market, mastodons record once more record profits.

With half-yearly results in increase of 27, China Construction Bank (CWB) and Industrial & Commercial Bank of China (ICBC) are vying for the top of the podium. First Bank of the country in terms of assets, ICBC recorded a profit of 84,603 billion yuan (approximately EUR 10.1 billion), the largest since its IPO in 2006, allowing him to win for the third consecutive year the title of the most profitable Bank of the world. The net result of the CWB rival stood at 70,741 billion yuan (8.4 billion euros) while that of the third Bank country, Bank of China (BOC), reached 52,022 billion yuan (EUR 6.2 billion), or 21 more than in 2009, and the fourth, Agricultural Bank of China (ABC), 45.8 billion yuan (5.5 billion).

In a context of favourable recovery, banks have benefited from the decline of their bad loans (except ABC), an increase in the supply of credit, but primarily from the increase in their income, an increase of 17 to 20 in the three largest. With a margin of profit on the loans of 2.37, ICBC registers record revenues of 180,928 billion yuan. Through its activities of cards credit, management of heritage and sales of insurance, they grew a third from last year. At CWB, held 10 by Bank of America, they soared by 44.

Thousands of billion

But the flight should lose steam. "The growth of the profits of banks could have reached a peak while the credit is expected to slow in the second half and there is little room for a new increase in interest margins," notes Giu Peng, Western securities. After sustained government stimulus with a record of 9.6 trillion yuan (1,100 billion euros) of new loans in 2009, banks should tighten the credit boom. Alerted by the threat of a collapse of the real estate market, the regulator has set a goal of 7.5 trillion of new loans for 2010 and currently submit Bank "stress tests" considering a fall in the price of 60 in some cities.

The Central Bank, banks gave 1.380 billion yuan of new loans to real estate on the first half, 26 less than last year. After having announced that it would limit mortgage at 5, CWB interrupted a third or fourth home buyers loans, while Agricultural Bank of China ordered the freezing of the credits to developers. Anxious to reassure investors, BOC said that the ratio of bad loans dropped to 1.2 from 1.53 six months ago.

Another area of concern, local government loans: granted to companies dedicated to the financing of infrastructures, these credits guaranteed by public bodies which can emit debt give rise to mistrust. They are estimated at 1,000 billion yuan by the authorities and represent between 18 and 20 of the total loans of the banking system, according to Standard & Poor's.

Banks are finally to recapitalize. With the duty of 11.5 capital ratio, the sector will have to lift up to 65 billion euros. Thus, BOC and ICBC should quickly to appeal to markets.