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26 August 2010 By John Foley Follow @johnsfoley

Strong quarterly results suggest the risk of a homemade financial crisis may be overstated. Even if state borrowers get into trouble or property prices tumble, big lenders are unlikely to collapse. But a global doubledip and chronic capital misallocation may still inflict pain.

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China's biggest lenders reported firsthalf earnings showing strong increases in interest and fee income, as pricing on loans improved, and fee income from clients grew. Banking sector loans overall grew 4.5 percent from the first and second quarters, marking a slowdown from 2009's rapid lending increase.

Industrial Commercial Bank of China on Aug. 26 reported earnings of 43 billion yuan for the halfyear, up 27 percent from the same period in 2009. Net interest income rose 24 percent and fees 32 percent. Nonperforming loans fell to 1.3 percent of total loans from 1.4 percent the previous quarter, 190 percent covered by provisions.

Bank of China on Aug. 26 reported earnings of 52 billion yuan for the first half, 27 percent up on the same period in 2009. Net interest income and fee income both rose 23 percent. Impaired loans as a percentage of total loans were 1.2 percent, down from the previous quarter's 1.3 percent.

On Aug. 20, China Construction Bank reported earnings of 71 billion yuan ($10.4 billion) for the first half of 2010, a 27 percent yearonyear increase. Net interest income rose 15 percent, while fee income grew 44 percent. While loans grew 11 percent in the six month reporting period, the ratio of nonperforming loans fell from 1.5 percent to 1.2 percent.

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