BEIJING (AP) -- Bank of China Ltd., one of the country's four major state-owned lenders, said Thursday its profit growth fell sharply this year due to slowing economic growth and government interest rate reforms.
The Beijing-based bank said profit rose 7.6 percent to 71.6 billion yuan ($11.3 billion) in the first half on revenue of 179.7 billion yuan ($28.5 billion). That was less than half the 19 percent profit growth rate for 2011.
The bank cited profit pressures including a decline in economic growth and interest rate reforms that squeezed the margin between what institutions could charge borrowers and what they paid depositors.
"The bank's operating environment is expected to remain complicated in the second half of 2012," said a bank statement.
China's major banks are among the world's biggest by assets and market capitalization.
They avoided the mortgage-related turmoil that battered their Western counterparts and enjoyed strong profit growth after China's quick rebound from the 2008 global crisis. But they warned of possible risks this year due to slower growth and global uncertainty.
Economic growth slowed to a three-year low of 7.6 percent in the three months ending in June and analysts say a recovery is likely to be slow and weak.
Bank of China said its first-half net interest income rose 12.6 percent over a year earlier to 124 billion yuan ($19.7 billion). The bank said, however, that the cost of interest liabilities on customer deposits rose faster than borrowing.
Analysts have expected the large profit margins of China's state-owned banking industry to shrink as the communist government gradually liberalizes rates to improve economic efficiency.
China's three other major state-owned lenders — Industrial & Commercial Bank of China Ltd., Agricultural Bank of China Ltd. and China Construction Bank Ltd. — are expected to report similar declines in profit growth when they release results in coming days.
Government controls have given Chinese banks a margin between lending and deposit rates of more than 3 percent — among the world's largest — and guaranteed them fat profits. Profits for China's banks are equal to more than 3 percent of gross domestic product, the highest rate for any major economy and well above Japan's 0.6 percent and Australia's 2.7 percent.
In April, Premier Wen Jiabao said Beijing needed to "break the monopoly" of state-owned banks to allow credit to flow more freely to entrepreneurs who generate economic growth.
In June, the central bank expanded banks' flexibility in lending rates, lowering the minimum for commercial loans from 0.9 times to 0.8 times the official level. Controls on deposit rates also were eased, allowing banks to pay up to 1.1 times the official level.
That change was expected to narrow banks' interest rate margin by about 0.2 percentage points, according to industry analysts.
More than 70 percent of bank loans already are charged at rates above the benchmark, according to J.P. Morgan. That could help to cushion the impact of easing controls on deposit rates because banks effectively already have wider margins on those loans.