HONG KONG  - China Construction Bank, the country's No.2 lender, said its 2012 net profit rose 14 per cent, its slowest annual profit growth as a publicly listed company, hit by the country's attempts to rein in state-owned lenders' profitability.

CCB made a net profit of 193.2 billion yuan ($31.1b) in 2012, according to a Chinese-language statement posted on the Shanghai Stock Exchange. For Oct-Dec, it made 34.97b yuan, according to Reuters calculations of company figures. Its full-year result was in line with expectations for 192.6b yuan, according to a Thomson Reuters I/B/E/S survey of 24 analysts. In 2011, the bank made 169.26 billion.

Profit growth at China's banks has slowed since its former Premier Wen Jiabao said in April last year that its lenders "made money too easily". The only other time CCB reported annual earnings growth of under 20 percent was in 2009, in the depths of the global financial crisis.

 A cooling Chinese economy that grew by the slowest in over a decade in 2012 has raised expectations that the country's banks may see a spike in bad loans, largely stemming from a 4 trillion yuan stimulus package in 2009 and from over-investment in its frothy real estate and infrastructure sectors.

So far, this has not played out, with CCB reporting a non-performing loan (NPL) ratio of 0.99 percent at the end of 2012, down 1 basis point from the 1 percent at the end of September. Impairment losses more than doubled to 18 billion yuan in the Yangtze River Delta, which includes Shanghai.

The bank has been putting aside more in anticipation of a rise in bad loans, with its allowance to NPL ratio up almost 30 percentage points to 271 percent.

Sanford Bernstein analyst Mike Werner said the overall NPL ratio had not yet risen because many of China's inland provinces were still growing quickly, helping to offset rising bad loans in overheated coastal regions.

"Although China's GDP has slowed, we don't expect NPLs to rise for at least two years," Werner said.

BETTER PRICING POWER

Two landmark moves to allow banks more freedom in setting their own rates helped widen the bank's net interest margin, which measures loan profitability, to 2.75 percent from 2.74 percent at the end of the third quarter.

Net interest income in 2012, which is the amount a bank charges for loans minus what it pays depositors, rose 16 percent to 353 billion yuan.

The bank also said it extended about 1 trillion yuan in new loans in 2012, with about 7.5 trillion yuan in total loans outstanding. Fee and commission income, which has come under fire domestically after Wen's comments on the banks' profitability, was up 7.5 percent.

CCB also said it had established a subsidiary bank in New Zealand, injecting $50 million into the operations there.