By staff reporter Wang Zhen

The Shanghai Composite Index opened at 3545.57 Wednesday -- the last trading day for a holiday-shortened week in China -- and quickly soared more than 100 points, gaining around 3 percent by mid-morning after two blue chip banks released above-expected first-quarter financial statements.

Shares in Bank of Communications (SHSE: 601328, HKSE: 3328) rose by mid-morning more than 2 percent to 10.70 yuan. Bankcomm reported a 7.89 billion yuan after-tax profit for the first three months of 2008, an increase of more than 107 percent from the same period last year.

China's largest commercial bank ICBC (SHSE: 601398, HKSE: 1398) saw its stock value climb more than 3.5 percent in morning trading to 6.60 yuan, one day after the bank reported a first-quarter after-tax profit of 33.28 billion yuan, up 76 percent from the first three months of 2007.

Investment firm Goldman Sachs called ICBC's results “solid,” adding they “beat our estimates.”

Bankcomm's growth results also topped Citic Securities forecasts, analyst Lv Xiaojiu told Caijing. “BankComm's first-quarter after-tax profit growth was more than 15 percent higher than our initially set 90 percent growth,” Lv said.

Bankcomm said net income from fees and commissions increased 70 percent year-on-year -- exceeding the growth rate for net interest income. Net fee income contributed to about 11 of the bank's total income. At the same time, thanks to the government's tightened credit policy, net interest income in the first quarter reached 16.5 billion yuan -- up 50 percent from same period 2007.

Bankcomm CEO Qian Wenhui told analysts in a conference call Tuesday that, as far as he knows, “a good amount” of holders of so-called “non-tradable” shares will not be cashing in, at least in the short term. A week before, Chinese securities regulators announced limits on the wholesale system for all newly freed, non-tradable shares held by state-controlled entities.

On the Hang Seng Index in Hong Kong, shares in Bankcomm and ICBC fell slightly by about 0.8 percent in morning trading, even though analysts said the banks' fundamentals had not changed.

Financial reports from companies as well as banks across China were giving investors plenty to ponder. Wednesday was the deadline for all public companies listed on the Shanghai exchange to publish their 2007 annual reports as well as their first-quarter 2008 results. The mainland's markets are closed Thursday and Friday for the Labor Day holiday.

A Shanghai Stock Exchange report Wednesday said overall 2007 annual revenues, profits and net profits for listed companies grew 24.54 percent, 41.93 percent and 45.86 percent, respectively. These higher results point to higher per-share profits on the A-share market, the report said.

But Xue Lan, China Equity chief at Citigroup, said per-share profits will be less dramatic for stocks in banking than other sectors, whose financials impact banks only gradually as reflected by non-performing loans. For example, ICBC's non-performing loan ratio has continued to improve, falling 0.23 percentage points since the end of 2007, while its allowable NPL ratio has climbed 7.22 percent in the same period.

For the rest of the year, Lv predicted China's banking sector would maintain steady though reserved growth.

1 yuan = 14 U.S. cents

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