Pudong Bank, Part Owned by Citigroup, Profit Rises

Shanghai Pudong Development Bank Co., part owned by Citigroup Inc., said profit rose 64 percent last year to 5.5 billion yuan ($756 million).

The bank also said 2007 revenue increased 35 percent to 40.3 billion yuan in a preliminary earnings statement to the city's stock exchange today. Per-share earnings were 1.26 yuan, it said. The statement didn't say whether the figures were calculated using domestic or international accounting standards.

Profits surged at China's banks last year, boosted by a wider gap between lending and deposit rates and by rising loan demand. Earnings growth may slow in 2008 after the central bank last month raised the benchmark deposit rate to a nine-year high, analysts at Macquarie Equity Market Group and UBS AG predict.

Pudong Bank's shares fell 5.2 percent to 50.76 yuan at 11:39 a.m. Shanghai time. The stock more than doubled last year, compared with a 31 percent gain in Industrial & Commercial Bank of China Ltd., the country's biggest, and a 22 percent increase in Bank of China Ltd.

The People's Bank of China raised the one-year lending rate by 0.18 percentage point to 7.47 percent on Dec. 20, and the one-year deposit rate by 0.27 percentage point to 4.14 percent.

Increasing deposit returns more than lending rates may trim loan margins at Chinese banks, which rely on extending credit for more than 80 percent of their income.

New York-based Citigroup has a 3.78 percent holding in Pudong Bank, which was diluted from the original 5 percent it bought in 2003 after the Shanghai company sold new shares in November 2006.

Pudong Bank was established in 1992 by the local government to finance development of Shanghai's Pudong financial district into China's version of Wall Street. The bank now has about 380 branches nationwide.