'Buy’ Rating Maintained

According to the company’s 1H 2008 Report, the company’s net profit increased by 90.9％, fully diluted ROE was 13.31％ and EPS were RMB 0.46. The company's surge in net profit growth was attributed to a rapid growth in interest margin, lower provision growth and reduction in effective corporate income taxes.

However, the company's further interest margin growth will face pressure from two factors: the amount of loans granted this year will be restricted by insufficient capital and liabilities costs which have risen due to increasing fixed deposits.

In addition, the performance of the company's assets has improved. Both its non-performing loans and its non-performing loan ratio have decreased. The covering rate of provisions has been increased to 126.1%, an increase of 15% compared with that in beginning of the year.

Moreover, the approved RMB 11.5 bln private placement will increase the company’s capital adequacy ratio to more than 10%, from the current 8%. Consequently, the company’s businesses will benefit greatly. Industry analysts have maintained a ‘Buy’ rating and upgraded positive profit expectations for the company to RMB 0.75 per share for 2008 and RMB 0.93 per share for 2009.

Hua Xia Bank Co., Ltd.

Source: www.sw2000.com.cn

CN01/CJ/JL/BT/KM