Healthy profits for Bank of China

Bank of China shares have suffered in recent months

Bank of China has reported a 31% rise in 2007 net profit despite nearly $5bn (£2.5bn) in exposure to assets affected by the sub-prime mortgage crisis.

The bank said 2007 profits were 56.3bn yuan ($8bn; £4bn), up from 43.8bn yuan in 2006 and better than forecasts.

The state-run bank made a $1.3bn impairment allowance to cover potential losses on its sub-prime exposure.

China's booming economy boosted its profits, which are in sharp contrast to the losses at many western lenders.

But Chinese banks are expected to face a tougher 2008 as Beijing imposes curbs on lending to dampen inflation.

Bank of China is thought to have the greatest exposure to the credit crisis of all Asian lenders.

Shares stumble

The lender's exposure to the sub-prime crisis is less than in September, when it reported a figure of $7.95bn.

Its shares have foundered in recent months on fears that its exposure to assets based on sub-prime loans would cost it billions.

In January, the bank's shares were suspended and it was forced to issue a statement dismissing concerns about sub-prime related losses.

Meanwhile, fellow state-owned lender Industrial & Commercial Bank of China (ICBC) reported a 65% rise in 2007 net profit to 81.5bn yuan.

It said it was not significantly affected by the sub-crisis that has devastated some of its international rivals.

ICBC said it held investments related to the sub-prime crisis worth $1.23bn and it had booked an allowance for potential losses on those assets of $400m.